In this edition of Asia Pacific Watch, we have a focus on inflation. The right amount of inflation can be a positive driver of real estate performance, especially when leases are structured to capture rising inflation, while long term correlation analyses also find that capital values tend to grow quite strongly with inflation. With Central Banks globally having pushed policy rates so low for so long, there are views at both extremes on the implications for the medium to long term inflationary outlook. On the one hand, some assert that inflation will return with a vengeance and necessitate a rapid and aggressive tightening by Central Banks in the next few years. Others note that the global boom and bust in the mid to late 2000s was unprecedented, and combined with slowing/ageing demographics, deflationary risks abound. Our view lies in between these extremes and, as is often the case in Asia Pacific, regional generalizations rarely apply. The key take-away from this Watch is our final analysis where we show that, for the last 7 years, at least, for all the major markets of the region, the total returns derived from real estate have quite easily out-stripped inflation.
Source : CBRE Global Investors