Re-alignment in a post-Covid world
Despite successful vaccination programmes and economic support policies, Covid-19 continues to impact our real estate markets. As the pandemic posts its latest resurgence, most European governments have been able to successfully limit its economic impact. This is offering a different environment for real estate as well, triggering the question how real estate investors can best re-align their investment strategy in a post-Covid world.
Inflation hits the headlines
The post-Covid rebound has surprised on the upside, as vaccinations and economic supports were successfully rolled out, leaving unemployment largely unchanged. However, stronger than expected GDP growth combined with supply chain disruptions and associated shortages have triggered higher inflation. In the past few months of 2021 there has been much debate about the drivers of inflation, with much focus on the short term, particularly the news flow of shipping and energy costs. The danger of enduring above-target inflation poses a new policy dilemma for central banks, as recent consensus assumed transitionary inflation. However, investors have priced in rate hikes and tapering. As a result, we consider the impact of a new inflation scenario besides our lower-for-longer base case.