The conundrum facing policy makers in Asia for the better part of 2010 was dealing with a flood of international capital in search of better yields. Since late 2010, policy and investor attention have turned to a by-product of strong economic growth: inflation. Inflationary developments in several Asian economies triggered alarm bells as the rate of price increases exceeded the thresholds of Asian regulators. Policy response has manifested in the form of rhetoric against inflation and actual policy tightening by Asian authorities.

For investors, the burning question is: How has the economic and real estate landscape been altered by unabated increases in prices? Should investors change course? In this article, we seek to cast light on the likely consequences of rising inflation on Asian economies and real estate and why investors will continue to benefit from exposure to the sound fundamentals of Asia.

Although the sharp run-up in inflation has injected greater economic