Property and Inflation Revisited (May 2024) Full Report




Full Report

There is a long-running debate about whether property as an asset class offers investors a hedge against inflation. This debate is clouded by ambiguity around what is meant by a hedge. For this report, a distinction has been made between an ‘inflation match’ and the technical definition of an ‘inflation hedge’.

The IPF report, Property and Inflation, published in April 2011 and based on data up to 2009, found that the investment returns from commercial property provided an inflation match in the long run but did not provide a perfect technical hedge against inflation. The positive real returns over the longer term were achieved primarily through receipt and reinvestment of the income return rather than through capital value growth.

However, since the 2011 report, there have been several economic and geopolitical events, most notably the Covid-19 pandemic and its aftermath, that have led to rates of inflation that have not been seen in the UK since the early 1980s. For this new report, analysis from the 2011 study that examined whether total returns from commercial property provide a technical hedge against inflation has been extended to 2023. Whether property has provided an inflation match over the long run is also examined, as well as whether the income generated by commercial property has been a better hedge against inflation than the total returns. The implications of the findings for investors are then considered. The updated analysis supports the main conclusions of the 2011 IPF report.