THE ROLE OF MACRO-ECONOMIC INDICATORS IN EXPLAINING DIRECT COMMERCIAL REAL ESTATE RETURNS: EVIDENCE FROM SOUTH AFRICA

Omokolade Akinsomi, Nikiwe Mkhabela and Marimo Taderera

AfRES from African Real Estate Society (AfRES)

Abstract: This study investigates the role of macro-economic indicators in explaining direct real estate returnsin South Africa (SA). Literature review is conducted to identify factors that drive direct commercial real returns andthe identified drivers are tested in an emerging market. The study applies SA annual commercial real estate returnsincluding total returns, rental growth and capital growth published by the Investment Property Databank (IPD)over the past 20 years, from 1995 to 2014, as an independent variable. The most dominant and significant factorsthat explain total returns across all property types and provinces in South Africa are GDP, unemployment rates andinterest rates which are macro-economic indicators. Our study finds key differences between the determinants oftotal return and change in capital values which are different from the variables which determine rental growth- theresults also highlight the heterogeneity and complexity of real estate returns.These results are important for asset managers as well as government regulatory agencies to make better informeddecisions in relation to factors which affect direct real estate returns in an emerging economy.

Keywords: Africa; Direct Real Estate; Emerging Markets; Macro-Economy; Returns (search for similar items in EconPapers)
JEL-codes: R3 (search for similar items in EconPapers)
Date: 2017-09-01
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