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

PurposeThis study examined the performance of commercial and residential real estate investments in the Ibadan property market to provide information for investment decisions.Design/methodology/approachThe study used a mixed research design (qualitative and quantitative). Data were obtained employing in-depth interviews with randomly selected sixteen estate surveyors and valuers practising in the Ibadan property market. Data for the study were analysed using the phenomenological thematic content analysis. Similarly, data on rental and capital values were translated to income, capital and holding period returns. The Kwiatkowski–Phillips–Schmidt–Shin (KPSS) and Philip–Perron (PP) models were used for unit root analysis. Ordinary least square (OLS) regression model was used to test for inflation-hedging characteristics, and the Granger causality tests were carried out to analyse the causal relationship between the variables.FindingsThe study revealed that the Ibadan property market is still immature. For the return components, the study found that the Ibadan property market provided mean holding period returns of 10.82%, 14.31 and 8.29% for office, shop and residential property types, respectively. The study also revealed that the selected property types are perverse hedges against inflation. Similarly, the study showed a unidirectional causal relationship between inflation and returns on the selected property types.Practical implicationsResults of this study revealed the peculiar nature of the Ibadan property market; findings from the survey can be used as a guide for investment decisions by foreign and domestic investors. Shrewd investors can take advantage of the high returns provided by the real estate assets in the Ibadan property market (by investing in the property market) to obtain high returns and expand their investment portfolio.Originality/valueThis study is the first to examine, in an eclectic and comparative context, the performance of commercial and residential properties in the Ibadan property market from the perspective of its market maturity level, returns profile, as well as its inflation-hedging characteristics. Findings from the study will equip both individual and institutional investors with valuable information for investment decisions.

A Downside Risk Analysis of Inflation Hedging Capabilities of Individual Assets and Optimal Asset Allocation

The objective of this study is to examine the inflation hedging capabilities of most widely used asset classes in Pakistan. It also attempts to find out the possibility of creating an inflation protected optimal asset mix. The sample consists of monthly data of cash, gold, stocks, foreign currency, real estate and inflation from 2005 to 2015. The major sources of data are SBP, World Bank and Pakistan Statistics Bureau. The downside analysis of these assets concludes that cash act as an inflation hedge for all the investment horizons. The findings showed that the Gold and stocks also have inflation hedging abilities in short run which extend to medium term investment horizon for gold only, while stocks appear to be a good inflation hedge for longer investment horizons. This study also suggests that investors can strategically create optimal portfolios that are hedged against inflation.

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

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.