This study examines the hedging behaviour of real estate investment in a high inflationary environment. The hypothesis that the real estate investment hedges both expected and unexpected inflation is tested. The returns of investment on residential apartments in several neighbourhoods in the capital of Turkey are used in the analysis. Expected inflation is measured by three proxies. It is found that in a high inflationary environment, real estate investment does not provide hedge against inflation. A reverse causality between returns on real estate and changes in expected inflation is not observed. However, a relationship between real returns and changes in inflationary expectations seem to be different in relatively low and relatively high income neighbourhoods.