Residential Real Estate as a Potential Hedge of Capital Against Inflation

Wolski, Rafał

doi:10.2478/remav-2023-0004

Cited by 8 publications

(6 citation statements)

References 29 publications

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“…For the other investments, no such rela�onship could be demonstrated. These results are in turn close to those obtained with corresponding or similar methods on the Polish market by Fiszeder & Rowinski (2012), Kasprzak-Czelej (2015), or more recently Wolski (2022Wolski ( , 2023, but also by Stevenson and Murray (1999) on the Irish market. Leaving aside Bitcoin, which could not be studied before, the results achieved are in contradic�on with other studies (e.g., Fama and Schwert 1977, Lee & Isa 2019, Choi & Shin 2022.…”

Section: Discussionsupporting

confidence: 90%

“…It showed that in seven of the eight largest ci�es, property prices were posi�vely related to the infla�on rate. Wolski (2023) conducted a cointegra�on analysis using the Engle -Granger test. The study was carried out between the first quarter of 2009 and the fourth quarter of 2021, analysing the correla�ons between hedonic indices calculated by the Na�onal Bank of Poland for 6, 7 and 10 selected ci�es in Poland and infla�on rates -actual and forecast, published by the Sta�s�cs Poland and the Na�onal Bank of Poland.…”

Section: Literature Reviewmentioning

confidence: 99%

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Measuring the sensitivity of bond, equity, gold and real estate investment returns to changes in the level of inflation

Wolski

2023

29th Annual European Real Estate Society Conference

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In the face of rising infla�on, a variety of financial tools are increasingly important to protect capital from loss of value. In such a context, ques�ons arise not only about what is worth inves�ng in in order to achieve investment returns that follow the rate of infla�on but also how to verify which investment is an infla�on hedger. This leads to ques�ons about which investment to choose and how to check whether its historical returns have allowed the capital to be protected from loss of value. However, some experts point out that this type of analysis is not straigh�orward and the outcome of the analysis may depend on the research method adopted.Aim of the study -to determine whether selected investment direc�ons on the Polish capital market are able to protect capital against infla�on-related loss of value.Research methodology -the study used two approaches, cointegra�on analysis and regression analysis, The first step was to analyse distribu�ons and calculate correla�ons between investments. This was followed by a cointegra�on analysis using the Engle-Granger test and a regression analysis using the OLS method. The study covered the period from Q4 2008 to Q4 2022. The following assets were used for the analysis: the TBSP index from the bond market, Bitcoin and gold quotes quoted in PLN, the WIG index from the Warsaw Stock Exchange, the WIG Real Estate stock index and the NBP hedonic index of property prices in the seven largest ci�es in Poland. These investments were related to the HCPI harmonised infla�on index published by the European Sta�s�cal Office (EUROSTAT).Result -The analysis carried out revealed different results depending on the survey methodology adopted. The co-integra�on analysis pointed to Bitcoin as an infla�on hedging investment. On the contrary, the regression analysis pointed to gold and residen�al property as infla�on combined.Originality/value -the study is an important contribu�on to the gaps in the Polish market in terms of analysis of capital protec�on op�ons against infla�on. Although the study focused only on the Polish market, this topic has not been addressed for a long �me in mature economies. Addi�onally, the study allowed for a comparison of the results obtained with different research methods. Introduc�onIn recent years, the Polish economy has faced difficult �mes, resul�ng in economic problems and especially a sharp rise in infla�on. The rise in prices is forcing investors to look for alterna�ves to poorly interest-bearing bank deposits, and the topic of hedging capital against loss of its value is returning a�er a gap of years. Investment in tradi�onal assets such as bonds, cryptocurrencies, gold, shares, or real estate is a natural course of ac�on. Although equity investments seem less obvious, they are based on real value and property, which makes them an important considera�on. Among the current investment direc�ons, it is impossible not to men�on Bitcoin. Cryptocurrencies, although

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Section: Discussionsupporting

confidence: 90%

Section: Literature Reviewmentioning

confidence: 99%

Measuring the sensitivity of bond, equity, gold and real estate investment returns to changes in the level of inflation

Wolski

2023

29th Annual European Real Estate Society Conference

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“…Comparing the obtained results with other studies of the Polish market, we can recognize their correspondence with the results of Trojanek (2004) and Melnychenko et al (2022), indicating the inflationhedging ability of the Polish residential market. The discrepancy with the results of Wolski (2023), who concluded that the Polish residential market does not effectively hedge against inflation, is due to using different data and applying a different research method.…”

Section: Discussioncontrasting

confidence: 64%

“…Melnychenko et al (2022), using regression analysis, showed that, in the years 2009 -2021, in seven of the eight largest local housing markets in Poland, the real estate prices were positively related with the inflation rate. Wolski (2023) conducted a cointegration analysis for 2009-2021. Using three aggregated hedonic price indices of residential real estate (for 6, 7 and 10 of the biggest Polish cities), he stated that residential property prices and inflation rates (actual and expected) were not cointegrated, so Polish housing markets do not effectively hedge against inflation.…”

Section: Realmentioning

confidence: 99%

The Potential of Residential Property in Poland as an Inflation Hedge Investment

Dittmann

2024

Real Estate Management and Valuation

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The research objective of the article was to assess the potential of residential property in Poland as an inflation hedge investment. The study was conducted using innovative measures of the level of inflation hedging. The study was made for Poland’s six largest local residential markets, for two types of investments, for different investment horizons (from 6 to 15 years). The research period adopted was: 3Q2006-4Q2022. In all cities, investments providing only capital gains allowed an attractive inflation hedging level to be achieved. Investments that additionally included rental offered a high inflation hedging level. The variation in the six cities studied in terms of inflation hedging through housing investment was found to be very low. The question of how extending the investment horizon affected the inflation hedging ability was not firmly answered. Frequently, the extension of the investment horizon has been accompanied by an increase in the level of hedging.

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“…Residential real estate prices are also influenced by the prices of construction materials and the prices of land for housing development [10], [11]. Real estates were compared with other financial assets as potential hedge during high inflation [12]- [14]. Another interesting aspects deal with the impact of the COVID-19 pandemic on the housing market [15]- [17], detecting house price bubbles [18] and Pearson correlation between real estate markets in different countries.…”

Section: Introductionmentioning

confidence: 99%

Socio-economic factors associated with house prices. Evidence based on key macroeconomic aggregates globally

Lewandowska,

Taracha,

Maciuk

2023

Bud-Arch

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The aim of this paper is to assess the association between macroeconomic factors and house prices in selected OECD countries. In this paper, authors describe selected socioeconomic factors, adapt a transparent methodology based on the OECD database and derive results shedding a light on the main drivers shaping the trends of the real estate prices. Two main economic aggregates, inflation and gross domestic product (GDP) were analysed for the OECD member and non-member countries for which complete data have been made available for the period of 1990-2020. The OECD provides data for 60 countries in total, out of which 38 are members of the organization. Nevertheless, due to missing observations in certain countries, the analysis was carried out in 19 of them. The aim of the study was to determine how GDP and inflation dynamics are correlated with changes in property prices. Among the analysed countries, Japan and South Africa could be distinguished as outliers in terms of inflation, whereas in the case of GDP, Italy, Japan, Ireland and Norway stood out. Additionally, 12 representative countries were described in detail. These countries comprised four groups of three countries divided across two dimensions: the first, based on the highest and the lowest correlation coefficient, and the second, based on the measure used to calculate the correlation coefficient (correlation of the house prices with GDP and correlation of the house price with inflation). On the basis of the analyses, it was shown that the association between GDP and house prices is stronger than that between inflation and house prices – in most cases, prices increased at a similar rate as GDP. A particularly high correlation between GDP and house prices was found for Norway, New Zealand and Sweden, indicating a potentially higher marginal housing consumption responsiveness to changes in housing wealth in these highly developed countries, characterised by particularly low housing transaction costs and efficient mortgage market. It was deduced that such characteristics lead to a higher wealth elasticity of demand for new houses.

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Residential Real Estate as a Potential Hedge of Capital Against Inflation

Cited by 8 publications

References 29 publications

Measuring the sensitivity of bond, equity, gold and real estate investment returns to changes in the level of inflation

Measuring the sensitivity of bond, equity, gold and real estate investment returns to changes in the level of inflation

The Potential of Residential Property in Poland as an Inflation Hedge Investment

Socio-economic factors associated with house prices. Evidence based on key macroeconomic aggregates globally

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