Inflation Expectations and Returns of Residential Property Investments in Some Selected Areas of Abuja, Nigeria
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Abstract
The aim of this research was to examine the relationship between residential real estate investment returns and the expected inflation of the Nigerian economy, with a view to determining the inflation-hedging characteristics in Phase 2 and Phase 3, Abuja, Nigeria. in order to achieve the stated aim, the following objectives were set: to determine the returns of residential real estate in districts of Phase 2 and Phase 3, Abuja, to examine the expected inflationary trend in the study area and to investigate the inflation-hedging characteristics of residential real estate investment in the study area. This research work adopted the cross-sectional survey type of design to obtain data from Estate Surveyors and Valuers in the study area through questionnaire survey. This was subsequently translated to returns using the Holding Period Returns. Similarly, secondary data with respect to the 91-day Treasury bill rates (used as proxy for expected inflation) for the period between 2012 and 2021 were also collected from the Central Bank of Nigeria. The two groups of data obtained for the study were subjected to unit root test using the rule of thumb method and the Ordinary Least Square Regression analysis was conducted between the variables. The study revealed that throughout the study period, the actual inflation had been in the double-digit range with the exception of 2016, 2020 and 2021 and it indicated a downward sloping characteristic in the inflationary trend analysis with a low R2 value of 0.4524. The study also found out that the returns in the districts of Phase 2 in Abuja indicated a complete hedge against inflation with a beta value of 1.00223, while that of Phase 3 districts returned a beta value of -0.14439. The study concluded that the residential property investments in Phase 2 of the Federal Capital Territory, Abuja, has the ability to hedge against inflation, while that of Phase 3 district has perverse inflation-hedging potentials. The investment information provided in this study has significant implications for both local and foreign investors desiring to invest in the Nigerian property market.
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