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Conventional wisdom has it that higher long-term interest rates hamper the performance of listed real estate, but over the long term, there is no significant correlation between both elements. One of the reasons for this is the inflation hedge of real estate when interest rates increase. Next to that higher interest rates are mostly a result of a growing economy where tenants take up more space which gives room for rents to increase.
Fundamental research shows that even if there are periods of short-term correlation between long-term interest rates and the performance of listed real estate, the long-term correlation is low or even negative.
Correlation European Real Estate versus German Bund
Source: DPAM, 28.02.2019