Real estate investors may well benefit from moderate inflation, says Tomasz Dukala, a board member at EPH European Property Holdings.
As a property investor with a long-term outlook, Dukala is relaxed about any scenario involving sustained inflation, provided it remains within a moderate range and hyperinflation does not set in. There are no indications of the latter happening, so far. Leases in the commercial real estate sector are generally inflation-indexed, so rental income rises with a slight time lag, but otherwise in sync with inflation. This requires tenants with good credit ratings and financial strength, whose sales can also keep pace.
Real estate investors can even benefit disproportionately if they have concluded long-term loan agreements at fixed interest rates. This means, then, that borrowing costs do not follow suit for the investor. Since the beginning of the year, the level of yields on the fixed-income (bond) markets, as a benchmark of market intere
