REAL ESTATE FINANCE & INVESTMENT: AN EVALUATION OF FOREIGN DIRECT AND INDIRECT PROPERTY INVESTMENT OPPORTUNITY IN AFRICA

Uduakobong Enamidem Akpan and Olusegun Adebayo Ogunba

AfRES from African Real Estate Society (AfRES)

Abstract: PURPOSE: Despite increasing trends of cross-continental property investment, foreign direct and indirect investment in Africa is disproportionately low regardless of the huge population and huge real estate demands on the continent. The JLL (2012, 2014) suggested that this is due to lack of information on the direct and indirect real estate investment opportunity (returns, risk and diversification potential) on the continent. The paper accordingly aimed to investigate the risk-return performance of direct and indirect property investments in Nigeria vis-a-vis those of the US, with a view to providing information that would serve as a preliminary guide for Asian, US and other international investment decision making. Nigeria was offered as an example of an African country with huge population and low foreign investment, while the US was offered as an example of a country/region actively involved with cross regional real estate investment that largely excludes Africa.METHODS FOLLOWED: Direct and indirect commercial property data in the US were obtained from the NCREIF (2015) and: FTSE NAREIT (2015) indices respectively. Data on indirect property in Nigeria was obtained from the Nigerian Stock Exchange while data on direct commercial property in Nigeria was obtained from total enumeration surveys of real estate firms. This direct property data was de-smoothened to ensure compatibility with indirect data.FINDINGS: Analysis of findings of the study revealed that Nigerian direct and indirect property outperformed US direct and indirect property investments in terms of both total return and risk-adjusted return in addition to demonstrating considerable diversification potential.Theoretical and Practical Implications. The paper has implications for the stimulation of direct and indirect property investment in Africa which currently lags the rest of the world in this regard.Originality: The paper is one of the first to empirically and comprehensively investigate investment potentials of African and non-African real estate.

Keywords: Africa; Foreign Direct/Indirect Property Investment (search for similar items in EconPapers)
JEL-codes: R3 (search for similar items in EconPapers)
Date: 2015-09-01
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