Inflation Correlation with Commercial Real Estate’ Investment Returns in Akure, Nigeria

Dabara, Daniel Ibrahim

doi:10.9734/jsrr/2014/12918

Cited by 7 publications

(12 citation statements)

References 11 publications

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“…Furthermore, in the investment circle, it has been observed that during periods of inflation, certain investment assets' purchasing power gets eroded, while some assets provides negative returns characteristics and high level of risk (Odu, 2011;Fraundorf, 2012;Akinsola, 2012;Dabara, 2014). Hence, investors need to first ascertain the hedging potential of an asset class as well as its diversification potential before investing in such asset(s) to avoid loss.…”

Section: Introductionmentioning

confidence: 99%

“…Previous research works in the field of inflation-hedging in both developed and developing economies included the investigation of the inflation-hedging capacities of: direct investments in real estate, indirect investments in real estate (REITs), investments in stocks, bonds, equities, commodities, gold, and shares among others (Fama & Schwert 1977;Bello, 2005;Zhou & Clements 2010;Omotor, 2010;Odu, 2011;Akinsola, 2012, Park & Bangs 2012Oluwasegun & Dabara 2013, Ogunba, et al, 2013Dabara, 2014;Dabara, 2015). Findings from these studies have shown a varying pattern, indicating lack of consensus on the ability of various asset classes to hedge against inflation.…”

Section: Introductionmentioning

confidence: 99%

“…Specifically, the inflation-hedging performance of real estate was particularly observed to have divergent results across different inflation components (actual, expected and unexpected) as well as real estate types (commercial, residential, industrial, agricultural etc) even in the same country (Oluwasegun & Dabara 2013). Dabara, et al (2014) asserted that regardless of the different findings presented by researchers all over the world on the performance of real estate vis-à-vis inflation, there are good reasons which could motivate investors to invest in real properties. Such reasons could be connected to the risk-return profiles of the asset class in question as it relates to diversification benefits.…”

Section: Introductionmentioning

confidence: 99%

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The Diversification and Inflation-Hedging Potentials of Direct and Indirect Real Estate Investments in Nigeria

Dabara¹,

Ogunba²,

Araloyin³

et al. 2015

Real Estate Markets Development: Meeting the Challenge, Making the Difference - The 15th African Real Estate Society Conference

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This study aims at examining the diversification and inflation-hedging potentials of both direct and indirect real estate investments in Nigeria from 2005 to 2014 this is with a view to providing information for investment decisions. DESIGN/METHODOLOGY/APPROACH: Secondary data on rental/capital values of direct real estate investments covering an average total of 1,587 residential properties was obtained from the records of 5 Estate Surveying and Valuation Firms in Gombe. Similarly, the dividend and share prices of the indirect real estate investment were also collected from the data bank of the Nigerian stock exchange. These data were subsequently translated to holding period returns. Furthermore, secondary data with respect to the Nigerian Consumer Price Index (CPI) which was used as a proxy for actual inflation for the study was collected from the National Bureau of Statistics (NBS). These data groups were used to calculate the asset and portfolio returns as well as the asset and portfolio risks of the selected assets. Furthermore, both descriptive and inferential statistics were used to determine the diversification and inflation-hedging potentials of the selected investment assets. This involved the use of weighted means, Pearson Product Moment Correlation and the Ordinary Least Square Regression. FINDINGS: The study revealed that investment in direct property provided the highest returns (22.48%) as well as the highest level of risk (8.71548%) over the study period. The study further showed that only the direct property investment demonstrated the existence of diversification potential. Similarly, among the two selected asset classes only direct property showed complete inflation-hedging potential with beta 0.082, while indirect property showed a beta of-0.126, suggesting a perverse hedging characteristics. PRACTICAL IMPLICATIONS: Diversification and Inflation-hedging potentials of investment asset classes is of particular interest to investors. The results of this study can be useful for investment forecasts as well as investment decisions on asset types to include in portfolios as a measure for protecting investors' earnings from erosion by inflation and a means of enjoying diversification benefits thereby improving the performance of the investment portfolio. ORIGINALITY/VALUE: Research work on the subject of diversification and inflation-hedging in Nigeria were majorly conducted in isolation. This study expanded the scope of the diversification and inflation-hedging literature by empirically investigating both investment indicators in a comparative context.

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Section: Introductionmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

See 1 more Smart Citation

The Diversification and Inflation-Hedging Potentials of Direct and Indirect Real Estate Investments in Nigeria

Dabara¹,

Ogunba²,

Araloyin³

et al. 2015

Real Estate Markets Development: Meeting the Challenge, Making the Difference - The 15th African Real Estate Society Conference

Self Cite

View full text Add to dashboard Cite

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“…In global markets, real estate investment asset classes are perceived to be good hedges against inflation (Dabara, 2014). This assertion was tested by studies conducted across the globe, these studies includes: Chu and Sing (2004); Liu and Zhou (2009);Leung (2010); Lee (2012) and Dabara (2015) among others.…”

Section: Introductionmentioning

confidence: 99%

Impact of Inflation on Indirect Real Estate Investments in Nigeria

Dabara¹,

Chiwuzie²,

Omotehinshe³

et al. 2019

26th Annual European Real Estate Society Conference

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The study aims at investigating the impact of inflation on securitized real estate investments in Nigeria with a view to providing information to aid real estate investors in making informed investment decisions. The timeframe for the study covers between 2007 and 2016. All the securitized real estate investments including both REITs and non REITs were captured in the study. The population for the study comprised of all securitized real estate companies in Nigeria namely: Skye Shelter Fund REITs, Union Home REITs, UPDC REITs and UACN properties. Data for the study were collected from the databases of the securitized real estate companies covering the study period. The data collected comprised of share prices and dividends of the respective companies as well as inflation rates obtained from the Nigerian National Bureau of Statistics (NBS). The data were analyzed by means of both descriptive statistical tools such as frequencies, mean scores and percentages; and inferential statistical tools such as regression models. Findings from the study revealed that the return profile of REITs and non REITs equities in Nigeria from 2007 to 2016 had experienced some level of volatility with the non REITs outperforming the REITs investment asset (the highest returns obtained from REITs investment was 5.43%, while the highest returns for the non REITs was 41.79%). Inflation was seen to be mostly in double digits and had kept increasing throughout the study period, ranging between 4.37 and 18.45. Analysis of the relationship between indirect real estate investment returns and inflation in the study area revealed negative Beta coefficients for both REITs and non REITs investments in the study area. This was indicated by a beta coefficient of -0.127 and -0.225 for REITs and non REITs asset classes respectively. This results suggested a perverse hedging characteristics for all the securitized real estate investments in the study area. This study have implications for individual and institutional real estate investors. The result of this study can be useful for investment forecast and investment decisions as regards to the type of asset to include in an investor's portfolio, taking to consideration the impact of inflation on such asset(s).

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“…For the N-REITs companies, the financial structure was further strengthened by sales of N-REITs shares in subsequent transactions in the stock market (through the agency of the stock brokers). The N-REITs industry pools together the resources of the various investors (institutional and individual investors) through the sale of the said REIT shares and injects same into the direct real estate market through the acquisition and development of income producing properties in prime locations of particularly Abuja, Port Harcourt and Lagos accordingly (Dabara, 2014;Dabara, Omotehinshe, Okunola, Ankeli & Adaranijo, 2016).…”

Section: Introductionmentioning

confidence: 99%

Financial Structure of Reits in Emerging Property Markets: An Assessment of N-Reits

et al. 2018

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Purpose: The study assessed the financial structure of REITs in emerging markets, using the Nigerian Real Estate Investment Trusts (N-REITs) to provide relevant information to guide both foreign and domestic investors. Design/Methodology/Approach: Secondary data obtained from the financial statement and annual reports of all the REITs companies in Nigeria namely Skye Shelter Fund, Union Homes REITs and UPDC REITs were used for the study. The study period covered from 2007 to 2016. Descriptive statistical tools such as frequencies, mean weighted scores and percentages were used in analyzing the data obtained for the study. Findings: The study revealed that UPDC REITs had the highest capital injected into the industry; hence it has the highest market capitalization. However the entire industry has a market capitalization of ₦41, 183, 684, 050 ($134.5 million) and a unit holders' fund of ₦44,726,754,000 ($146.2 million) within the study period, this is considered quite small when put alongside REIT companies of other nations with substantial market capitalizations such as the US which had a market capitalization of about $977.9 billion and South Africa with market capitalization of about $21 billion. Similarly, the study revealed that the N-REITs has great potentials given that the direct property from which it derives its income is doing well in terms of return performance in the study area.Originality/Value: REITs in emerging property markets has not been sufficiently studied. This study provided empirical data from an emerging property market which can guide prospective investors from across the globe. 31 and growth over the years since its inception in 1960 in the US (Drew, 2016). Other nations, most especially developed nations, have long also adopted REITs regimes in their respective capital markets. Previous studies have shown that REITs are thriving well in the global property market space. This assertion is buttressed by the financial structure of global REITs as well as individual REITs industries across the globe. Li & Chow (2015) for instance, estimated the global REITs market capitalization in the year 2013 at about $1.1 trillion. In the year 2016, the global REITs market capitalization was estimated at over $2 trillion (NAREIT, 2016) and in 2017; it was estimated to be about $3 trillion (NAREIT, 2017). A very large portion of the estimated global REIT market capitalizations comes from REIT industries of developed economies which are mostly characterized by matured property markets (NAREIT, 2017). Very scanty studies have been conducted on the contributions of REITs industries from emerging markets. Hence, this study will add to the existing body of knowledge in this field from the perspective of REITs in emerging markets, using N-REITs as a case study. The paper is structured as follows: the next section reviews related literature; section three presented the methodology adopted for the study; section four presented the results/discussion of results while section five presented the conclusion of the st...

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Inflation Correlation with Commercial Real Estate’ Investment Returns in Akure, Nigeria

Cited by 7 publications

References 11 publications

The Diversification and Inflation-Hedging Potentials of Direct and Indirect Real Estate Investments in Nigeria

The Diversification and Inflation-Hedging Potentials of Direct and Indirect Real Estate Investments in Nigeria

Impact of Inflation on Indirect Real Estate Investments in Nigeria

Financial Structure of Reits in Emerging Property Markets: An Assessment of N-Reits

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