Abstract
The paper explores the relationship between UK property returns and inflation in the short, medium and long-term to assess the claim that real estate is an effective inflation hedge. Although a perfect one-one relationship with inflation is not found, the paper unveiled some evidence of a dynamic adjustment process with a transmission mechanism running from an overheated property market to consumer prices and then back from inflation to real estate. These findings, which appear to hold both for residential and commercial property, have clearly different implications for buy-and-hold as opposed to dynamic rebalancing strategies.
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