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Property’s total returns over the long-term have positioned between those of equities and bonds.
Similarly, its risk (as measured by volatility) lies between the two other main asset classes.
At different times in the cycle, or in different regimes, property switches between having bond-like characteristics and equity-like characteristics; different factors will determine its value.
Fundamentally, economic growth drives property rental values and, consequently, returns.
Appraisals tend to smooth returns artificially, although the extent of that is not clear.
Asset allocation models suggest a high proportion should be held in property, but these results must be treated with some caution even after allowing for the smoothing of price volatility.
Source : AXA Real Estate
