The Impact Of Macro-Economic Variables On Real Estate Investment Performance:

Abstract

Real estate investment performance and investment decisions are usually affected by prevailing conditions of economics variables. The aim of this study is to examine the impact of economic variables on the performance of real estate investment and investment decisions. Data collected from this study include the rental/capital value and annual returns of 250 commercial properties in the study area. Data were from primary and secondary sources. Convenience sampling technique was adopted. Trend analysis was employed to evaluate trends in returns and Regression Analysis was used to estimate the relationship between returns on investment and inflation, exchange rate, and other variables. Results from the test statistics (Pearson Correlation) showed that the variables – inflation rates and exchange rate were significantly and inversely correlated with real estate investment performance with correlation value (r – value) of – 0.508 and – 0.925 respectively. Also, the results indicated that GDP and population rates have positive and significant relationship with real estate investment performance with the Pearson Correlation co-efficient (r - value) of 0. 839 and 0.684 respectively when tested at 5% significant level. Result also shows that unemployment and real estate investment performance have inverse association with a significant co-efficient of – 27.424. The study recommended among others provision for income/rental growth in property income valuation assignments to take care of variations in economic variables due to inflation and other macroeconomic variables.