Critical Study of Real Estate Returns in Nigeria
CHAPTER ONE
Objectives of the study
The main objective of this study is to make a statistical-based conclusion on the real returns of real estate investing and to validate (or dispute) the assumption that real estate investing in Nigeria is an “infallible” long-term financial plan or venture for a young Nigerian who is looking to plan his or her future.
The specific objectives are to;
- examine the expected real return on real estate investments in Nigeria;
- examine the presumed real return on real estate investments in Nigeria;
- examine the main risks of real estate investments in Nigeria;
- examine how these risks are mitigated or avoided; and
- determine the infallibility of real estate for young Nigerians.
CHAPTER TWO
REVIEWED OF RELATED LITERATURE
This chapter consists of five major sections. The first section gives an introduction to the determinants of real estate returns. The section highlighted the concepts of real return and the determinants of individual property returns as shown by previous studies. The second section delves into the real estate investment market. The section covers topics such as the characteristics of real estate, major players in real estate investment and property investment vehicles. The next section presents an historical overview of real estate investment in Nigeria. The fourth section reviews the empirical studies on the performance of real estate investment. The final section summarises and concludes by drawing the knowledge gap warrants the current study.
Determinants of real estate return
The determinants of real estate return have been studied in the past. GDP, interest rates, loan interest rates, consumer price index (inflation), output services, and unemployment are all factors that influence real estate returns, according to Chen and Mills (2006). GDP, inflation, and unemployment are all related to the selling price, according to De Wit and Van Dijk (2003). The unemployment rate does not have a positive relationship with rental rates, whilst GDP does. In their study, Frappa and Mesonnier (2010) find strong evidence that inflation targeting has a significant positive effect on real house price growth and the house price-to-rent ratio. Inflation, according to Huizinga (1993), causes lower relative price stability, which leads to increased investment uncertainty.
Feldstein and Summers (1979) also confirm that higher inflation results in higher artificial person income taxes. Pai and Geltner (2007) researched the NCREIF dataset to see if they could identify factors leading to long-run investment returns in real estate. They find that real estate characteristics such as asset size, property type, and market tier could be used to explain returns. Real estate returns have been discussed in terms of market efficiency, and their distribution, predictability, macroeconomic variables that may help explain their variations, and measurement methods. The literature has also looked at the returns of specific types of property (for example, office buildings, foreign real estate, and contaminated properties). Some research has attempted to provide tools or methods for better understanding real estate returns and markets. However, when it comes to the young generation, there is a scarcity of information on the infallibility of real estate investment. There has been some success in predicting real estate returns in the literature (Tuluca, Seiler, Myer and Webb, 2000; Cooper, Downs and Patterson, 2000).
CHAPTER THREE
RESEARCH METHODOLOGY
INTRODUCTION
In this chapter, we described the research procedure for this study. A research methodology is a research process adopted or employed to systematically and scientifically present the results of a study to the research audience viz. a vis, the study beneficiaries.
RESEARCH DESIGN
Research designs are perceived to be an overall strategy adopted by the researcher whereby different components of the study are integrated in a logical manner to effectively address a research problem. In this study, the researcher employed the survey research design. This is due to the nature of the study whereby the opinion and views of people are sampled. According to Singleton & Straits, (2009), Survey research can use quantitative research strategies (e.g., using questionnaires with numerically rated items), qualitative research strategies (e.g., using open-ended questions), or both strategies (i.e., mixed methods). As it is often used to describe and explore human behaviour, surveys are therefore frequently used in social and psychological research.
CHAPTER FOUR
DATA PRESENTATION AND ANALYSIS
INTRODUCTION
This chapter presents the analysis of data derived through the questionnaire and key informant interview administered on the respondents in the study area. The analysis and interpretation were derived from the findings of the study. The data analysis depicts the simple frequency and percentage of the respondents as well as interpretation of the information gathered. A total of eighty (80) questionnaires were administered to respondents of which only seventy-seven (77) were returned and validated. This was due to irregular, incomplete and inappropriate responses to some questionnaire. For this study a total of 77 was validated for the analysis.
CHAPTER FIVE
SUMMARY, CONCLUSION AND RECOMMENDATION
Introduction
It is important to ascertain that the objective of this study was to ascertain critical study of real estate returns in Nigeria. In the preceding chapter, the relevant data collected for this study were presented, critically analyzed and appropriate interpretation given. In this chapter, certain recommendations made which in the opinion of the researcher will be of benefits in addressing ascertain critical study of real estate returns in Nigeria
Summary
This study was on ascertain critical study of real estate returns in Nigeria. Three objectives were raised which included: examine the expected real return on real estate investments in Nigeria, examine the presumed real return on real estate investments in Nigeria, examine the main risks of real estate investments in Nigeria, examine how these risks are mitigated or avoided and determine the infallibility of real estate for young Nigerians. A total of 77 responses were received and validated from the enrolled participants where all respondents were drawn from selected real estate in Lagos. Hypothesis was tested using Chi-Square statistical tool (SPSS).
Conclusion
In conclusion, while the study acknowledges its limitations and the inherent complexities of the Nigerian real estate market, it underscores the importance of continued research, collaboration, and innovation in unlocking the full potential of real estate investments in Nigeria. By leveraging empirical evidence, adopting best practices, and embracing sustainable principles, stakeholders can pave the way for a more prosperous and resilient real estate sector, contributing to Nigeria’s overall economic prosperity and societal well-being.
Recommendation
- Improve data collection mechanisms and enhance the quality and accessibility of real estate data in Nigeria. This may involve collaboration between government agencies, industry stakeholders, and research institutions to establish standardized reporting frameworks and data-sharing platforms.
- Develop robust risk management strategies tailored to the Nigerian real estate market. Investors should conduct thorough due diligence, diversify their portfolios, and implement risk mitigation measures to navigate market volatility, liquidity constraints, and operational risks effectively.
- Review and streamline regulatory policies and frameworks governing the real estate sector in Nigeria. Policymakers should focus on promoting transparency, reducing bureaucratic hurdles, and ensuring compliance with international best practices to attract investment and foster market confidence.
References
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- Chandra, P. (2010). Investment Analysis and Portfolio Management. New Delhi: Tata McGraw Hill Education Private Limited
- Cheng, P. (2005). “Asymmetric risk measures and real estate returns”, Journal of Real Estate Finance and Economics, 30(1), 89-102.
- Cooper I., Priestley R., (2009) Time-Varying Risk Premiums and the Output Gap, Review of Financial Studies,22, 7, s. 2801-2833.
- Cooper, D& Schendler P, (2003), Business Research Methods, McGraw-Hill Education, New York
- Francis P. U (2016). Evaluation of Risk Elements In Real Estate investment In Nigeria: The Case Of Uyo Metropolis, Akwa Ibom State. IOSR Journal of Business and Management (IOSR-JBM) e-ISSN: 2278-487X, pISSN: 2319-7668. Volume 18, Issue 10. Ver. II (October. 2016), PP 70-75 www.iosrjournals.org
- Hoesli, M. and MacGregor, B. D. (2000). Property Investment Principles and Practice of Portfolio Management. Longman London