Abstract
Executive Summary.This study uses correlations and time-series regressions to revisit the inflation-hedging ability of Canadian direct real estate over the 1973-2007 period. Full-period results show that real estate hedges against inflation, and both expected and unexpected inflation. However, these results are strongly driven by the 1973-1984 sub-period, a high inflation environment. From 1985 to 2007 in a low inflation environment, no province or property type hedges against inflation and unexpected inflation, while exclusively British Columbia’s and Quebec’s real estate hedge against expected inflation. Additional tests suggest that the introduction of an “inflation targeting” policy by the Bank of Canada in 1991 might explain the vanishing of the inflationhedging ability of direct real estate in Canada.