Housing in the Greater Paris Area as an Inflation Hedge?

Aya Nasreddine and Yasmine Essafi Zouari

ERES from European Real Estate Society (ERES)

Abstract: In this article, we use the framework of inflation beta to test the capacity of physical residential real estate to hedge against inflation and its components, and compare it to the inflation hedge ability of various financial assets. Specifically, the housing asset is represented by the residential market in the communes of the “Grand Paris” metropolis with the different components of inflation. We start by analyzing the residential market in this area, its fundamentals, characteristics and dynamic. Then, applying the hierarchical clustering technique, we divide the Greater Paris area into five homogenous groups of communes and test its hedging ability using both correlation and regression analysis. Residential assets are confirmed to be a hedge against inflation, particularly against its unexpected component and thanks to its capital return rather than the rental return. On the other hand, the listed real estate does not provide the same hedging properties and thus cannot be considered as a substitute for this aim.

Keywords: Direct housing; Grand Paris Metropolis; Hedging ability; Inflation (search for similar items in EconPapers)
JEL-codes: R3 (search for similar items in EconPapers)
Date: 2023-01-01
New Economics Papers: this item is included in nep-rmg and nep-ure
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Persistent link: https://EconPapers.repec.org/RePEc:arz:wpaper:eres2023_11

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