Property as safe haven in downturn.

As I reach the officially designated twilight years of my career, the recent burst of inflation in the UK and the upward shift in bond yields brought memories of my early days, emerging into the world of work with inflation at 15%, the bank base rate well above 10% and 10-year gilt yields at around 13%. This time, amid the market and political turmoil, the social media seemed full of people of my generation reminding the succeeding generations how tough it had been for us, how we had survived it and that they should stop moaning (and that we’d told them this would happen all along). What struck me forcibly was how distorted and false many of those memories were, how much they underplayed the personal suffering that many experienced, and how little they seemed to grasp the nuances and complexities of the economics then and now, failing to account for the technical, economic and social changes that affect outcomes. 

Well, that’s social media and nuance isn’t a key feature of the digital world. Yet in real estate, we see similar oversimplification in commentaries. Bold, strong statements make for better press releases and soundbites, of course, and are intended to give an impression of confidence and reassurance in an uncertain market. My worry, though, is that they become received wisdom, particularly when made by established industry opinion formers and market gurus. 

I will focus on ‘property is an inflation hedge’. How many times have we heard that over recent months, in professional and retail markets? How often is it questioned or analysed critically? It has become an act of faith or a mythology, something which may have elements of truth, but is believed for reasons that are nothing to do with truth. Let’s explore the realities behind that, focusing on commercial real estate, then ask why it remains received wisdom.