Real Estate Returns and Inflation: An Added Variable Approach

Bond, Michael T.; Seiler, Michael J.

doi:10.1080/10835547.1998.12090932

Cited by 64 publications

(30 citation statements)

References 25 publications

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“…Analysing data using OLS regression, the study discovered that residential real estate assets partially outperformed inflation. Bond and Seiler (1998) analysed the linkage amid residential property return along with inflation in the United States. Using the regression model to analyse data over 25 years spanning 1969-1994, the results affirmed that residential property exhibited significant protection over inflation.…”

Section: Literature Reviewmentioning

confidence: 99%

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

Ekemode

2021

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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.

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Section: Literature Reviewmentioning

confidence: 99%

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

Ekemode

2021

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“…Nevertheless, subsequent findings on the inflation-hedging ability of real estate do not give a consistent result. Some studies (Hartzell et al, 1987;Miles and Mahoney, 1997;Bond and Seiler, 1998) concluded that real estate was a hedge against both expected and unexpected inflation when the US market was studied. Hoesli et al (1997) showed that real estate also provided a good hedge against inflation in the UK market.…”

Section: Literature Reviewmentioning

confidence: 99%

Inflation and housing market in Shanghai

Ge²

2008

Property Management

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Purpose -This paper sets out to examine the inflation-hedging ability of housing properties in Shanghai. Design/methodology/approach -This paper examines both the short-term and long-term hedging characteristics of Shanghai residential properties against three types of inflation: actual, expected, and unexpected in the test period of 1997-2005 by using the OLS model. Two methods, the Autoregressive Integrated Moving Average (ARIMA) and the Hedrick-Prescott Filter, are used to estimate the expected inflation. Findings -The results show that, while the Shanghai housing property market does not provide a hedge against actual expected and unexpected inflation during the period, a positive real rate of return is reported in all cases. Research limitations/implications -Data limitations are due to lack of complete market transaction records and it is necessary to rely on property indices produced by the private-sector firms as a proxy for market movements. Originality/value -The paper shows that government policy in this market is still a dominant factor affecting the rate of return and it has therefore implications for the construction of an efficient investment portfolio by institutional investors.

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“…Bond and Seiler (1998), using the added variable regression methodology (AVRM), also report that US residential property (using appreciation returns based on a transaction price index) is a significant hedge against both expected and unexpected inflation. Similarly, Ben‐Shahar (2001) using appreciation returns based on a transaction price index over the period 1990‐2000 in 25 Israeli cities, finds that housing provides an effective hedge against expected and unexpected inflation.…”

Section: Inflation‐hedging Characteristics Of Housing Investmentmentioning

confidence: 99%

Housing investment in an institutional portfolio context

Montezuma

2004

Property Management

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Residential property in a multi‐asset portfolio context has been considered from two substantially different perspectives: institutional investor's and the household's perspective. This paper constitutes the first of two related surveys on the role of residential property in a multi‐asset portfolio. The paper provides an introduction to housing property investment at a macro level and reviews the main empirical issues related to housing investment in an institutional portfolio context. The literature in this regard generally supports the evidence that residential property is a more effective hedge against inflation than both shares and bonds. Additionally, the reviewed studies generally report that unsecuritised housing investment not only generates risk‐adjusted returns comparable to those of bonds and shares, but also exhibits low levels of correlation with classic asset groups of institutional portfolios.

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Real Estate Returns and Inflation: An Added Variable Approach

Cited by 64 publications

References 25 publications

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

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

Inflation and housing market in Shanghai

Housing investment in an institutional portfolio context

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