Real estate investments: an effective hedging tool?

Real estate investing

Real estate investments continue to be an attractive alternative to stocks and bonds. Besides having a low correlation with the performance of the latter, historical data shows that real estate as an asset class has also been an effective hedge against inflation.

In IQ-EQ’s new Real Estate Investing white paper, we not only consider whether real estate as an asset class will continue to perform but seek to answer a critical question that persists: can real estate investments be considered an effective hedging tool against the current global economic environment?

To help us answer that question, researchers from IFI Global interviewed institutional investors in Australia, Canada, the UK and the US; the CEO of a London-based research firm that specialises in liquidity trends and macro-economic data; and a cross-section of real estate managers with a combined AUM of approximately $67 billion.

One consensus amongst the managers interviewed is that real estate will perform well in what is expected to be an unusually low interest rate environment for some time to come. On this basis, our white paper looks at economic, political and industry-specific issues that the real estate sector can be expected to face in the foreseeable future. As the decade ahead promises to bring with it an array of macro-economic obstacles, real estate investing looks poised to potentially counter these challenges.

Thus, while ‘safe as houses’ may be a far-fetched expression in these uncertain times, we consider that real estate is entering the 2020s better equipped to deal with the challenges ahead than many other areas of the asset management industry. The flexibility that is afforded to the real estate sector by its diverse range of asset types, interests, jurisdictions and investors should provide sufficient hedging against the global macro-economic environment. Or at least our interviewees hope so!

Download the white paper

Note: The research carried out for this white paper was completed before the extraordinary events we have witnessed in recent weeks with the onset and global spread of COVID-19. We therefore intend to conduct a similar study in six months’ time to assess the impact of the coronavirus on the real estate industry.

The official launch of this report takes place this afternoon during a webinar that we have organised in collaboration with Real Deals. Featuring a panel of industry experts moderated by Real Deals editor Nicholas Neveling, the webinar will discuss the extent to which real estate investments are an effective hedging tool against the current global economic environment.

Stay tuned on social media for insights following the webinar, and if you have any questions on the white paper or would like to find out more about IQ-EQ’s specialist real estate services, please don’t hesitate to get in touch.