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Housing in the Greater Paris Area as an Inflation Hedge?

Author

Listed:
  • Aya Nasreddine
  • Yasmine Essafi Zouari

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.

Suggested Citation

  • Aya Nasreddine & Yasmine Essafi Zouari, 2023. "Housing in the Greater Paris Area as an Inflation Hedge?," ERES eres2023_11, European Real Estate Society (ERES).
    • Handle: RePEc:arz:wpaper:eres2023_11
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    More about this item

    Keywords

    Direct housing; Grand Paris Metropolis; Hedging ability; Inflation;
    All these keywords.

    JEL classification:

    • R3 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location

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