Do real estate assets hedge inflation better than financial assets? Some New Zealand evidence

Abstract

This study examined the effectiveness of real estate assets in hedging inflation; financial assets are also analysed for the purpose of comparison. The real estate assets classes examined include residential, commercial, industrial and farm buildings, whereas the financial assets classes include stocks, short-term government bonds and long-term government bonds. The rate of inflation is proxied by the change in consumer price index. The findings revealed that all four types of real estate assets provide a partial hedge against actual inflation. However, their financial counterparts failed to provide any hedge against inflation. Copyright © 2005 John Wiley & Sons, Ltd.