Inflation Protection from Home Ownership: Long-Run Evidence



This paper examines the inflation hedging capacity of private investors' largest asset, their home. We analyze the inflation protection for different periods and varying investment horizons using a unique sample in which 350 years of house prices and consumer prices are combined. Our results show that a house only ffers protection against expected inflation when investment horizons rise in excess of ten years and only if inflation is persistent. In periods when

inflation is not persistent, as was the case in the first half of our sample period, house

price changes are not positively related to the inflation rate. Paper download