A fresh look at the inflation-hedging attributes of residential property investments in emerging markets: evidence from Nigeria

Abstract

PurposeThis study reinvestigates the short-run and long-run inflation-hedging attributes of residential property assets in the Nigerian property market, based on variations in property types and location.Design/methodology/approachData used for this study comprised the holding period returns of three residential property types, namely bungalow, block of flats and detached house during 1999–2018. These were obtained from property practitioners in Lagos, Abuja and Port Harcourt, respectively. The inflation values obtained from the National Bureau of Statistics were split into actual, expected and unexpected components. Fama and Schwert’s (1977) ordered least square (OLS) regression was used to assess the short-term inflation hedging efficacy. Afterwards, the long-run link between residential property and inflation was examined using the Johansen and Juselius cointegration test.FindingsThe results showed that despite the variations in hedging behaviour across property types in the three locations, residential property assets significantly provided protection over actual, expected and unexpected inflation in the short run based on the OLS regression analysis. The result of the Johansen and Juselius cointegration test also established a long-term link between the residential property assets and actual inflation. However, mixed results were found on the link between residential property and expected and unexpected inflation, as some of the assets did not effectively hedge these inflation components in the long run.Practical implicationsThe study implied that the differences in property types and geographic locations are crucial in establishing the short-run and long-run inflation-hedging attributes of residential property assets and should be factored into consideration.Originality/valueThe paper complements the existing body of knowledge on the inflation-hedging attributes of residential property in emerging markets by determining the effects of variation in house types and geographic differences on the analysis.

Boosting Homeownership Affordability for Low-Income Communities in Indonesia

“…Thus, in the future, the Regional Minimum Wage will increase so that people's needs for housing will be met. This is in line with studies [52,55,[73][74][75][76][77] shows that the regional minimum wage affects on the purchasing power of low-income communities.…”

Performance of commercial and residential real estate investments in Ibadan property market, Nigeria

“…This study's findings are congruent with the results of earlier studies conducted by Zhou and Clements (2010) and Arnason and Person (2012), which asserted that real estate provides perverse inflation-hedging characteristics against inflation. Nevertheless, disagree with the studies conducted by Terahni et al (2012) and Ekemode (2021). However, these conflicting results are not surprising as studies such as Bello (2004) and Dabara (2014) have recognised that Nigeria's real property investments are not an alltime hedge against inflation.…”

“…Consequently, we have an incomplete picture of the overall market dynamics of such real estate markets. Furthermore, the earlier studies are geographically localised and mainly restricted to the Lagos, Abuja, Port-Harcourt, Akure and Gombe sub-markets (Akinbogun et al, 2014;Dabara, 2014;Abere PM 40,2 et al, 2020;Ekemode, 2021). This study will add to the body of knowledge in this field by extending the sub-markets studies in Nigeria to include the Ibadan market because of its importance in the Nigerian real estate market space and its significance in Africa (being the second-largest city in Africa).…”

“…The study will also investigate the market maturity level, return profile and the inflation-hedging characteristics of the Ibadan property market in an eclectic, all-inclusive and comparative context to add to the scanty literature in emerging property market analysis. As Ekemode (2021) observed, this is essential because real estate markets in emerging economies are highly localised in terms of geographical location; therefore, performance findings from one market cannot be generalised. Hence, it becomes necessary to provide information on each significant sub-market to guide investors in making informed investment decisions.…”

“…Similarly, real estate investments' hedging capability concerning actual, expected and unexpected inflation components was found to vary. This was attributed to the localised nature and the dynamic nature of real estate markets (Dabara et al, 2016;Ekemode, 2021).…”