Insights

In August last year, we highlighted that real estate (listed and direct) tends to outperform equities during periods of high inflation.

Just as we seemed to be passing peak inflation (port access has been improving and second hand car prices declining), the recent attack by Russian forces into Ukraine has resulted in another spike in commodity prices.

According to CoreLogic, Australian house prices increased +22.1%[1] in 2021, led by Australia’s largest city of Sydney (+25.3%).

One of the less than expected by-products of the ‘COVID cycle’ has been the boom in household savings.

One of the many accepted truisms in real estate is properties with a long WALE (weighted average lease expiry) tend to be lower risk.

As vaccination rates increase around the world and we (hopefully) return to some normality in our daily lives, world economies appear to be stabilising. Economic output is near or above pre-pandemic levels, and signs of inflation and wage pressure have become a theme of 2021.

Imagine you are an office manager for a medium sized firm of 20 employees. Under normal circumstances, you and the staff would occupy around 400 sqm of office accommodation located in the CBD. But these are not normal circumstances. Lockdown orders mean that all staff are currently working from home.

We’ve often stated that real estate (listed and direct) tends to outperform equities during periods of high inflation and have previously cited the following chart as evidence of this dynamic.

The latest trends in housing, shopping, saving and interest rates – and what they mean for investors.