Global Determinants of Direct Real Estate

Investment Returns in Nigeria



By Kalu Nwojo Awa, Jovita Nnametu and Fidelis I. Emoh, PhD

Department of Estate Management
Nnamdi Azikiwe University

Awka, Nigeria




As the world is closing in into a global community, it has become a common practice among investors to spread their investment across the countries of the world in efforts to exploit business opportunities wherever they exist. This has been made easier by the advent of modern technologies that facilitate communication and business transaction processes. To real estate investors, their major concern is the level of returns accruable to their investments; therefore, the study is carried out to identify the global determinants of direct real estate investment returns in Nigeria. Questionnaire was used in collecting data from practicing estate surveyors and valuers resident in Abuja, Lagos and Port-Harcourt. The findings reveal that gross domestic product, unemployment rate, inflation, exchange rate (i.e. decline in domestic currency) and rate of taxation are major factors that determine direct real estate investment returns in Nigeria. Therefore, to attract more foreign direct investments in real estate sector in Nigeria, government and her relevant agencies should evolve viable policies that will effectively manage the above enumerated macroeconomics factors as well as grow the economy to make real estate investment attractive in Nigeria.

Keywords: Real estate, Investment, returns, determinants of real estate returns.


An investment constitutes an effort that is undertaken by investor to advance money with the intention of making profit in the future. Investors may put their money into many instruments such as stock, bond, mutual fund, gold, real estate and bank deposit. Real estate investment is considered as a long term investment compared to other types of investment.

Investors may invest in income producing property and non-income producing property. When investing in income producing property, investors expect to get profit from income stream which is reflected in cash flow during the holding periods or duration of ownership.

The nature of real estate market makes it an attractive and lucrative asset for many investors. Real estate investment offers opportunities to investors who can invest directly in physical real estate or may choose to invest indirectly through managed funds. Investing directly in real estate involves purchasing the residential or commercial property for use as an income-producing property or for resale at a future time. Indirect ways to invest in the real estate market include investing in real estate investment trusts (REITs), real estate exchange traded funds (ETFs), commingled real estate funds (CREFs) and infrastructure funds. Indirect real estate investing offers pension funds and other institutional investors all of the benefits of direct property ownership while eliminating many of the drawbacks of direct ownership. In addition, indirect investing allows much greater diversification across geographic regions and real estate industry sectors, enhancing further the benefits of the asset class. Due to the higher liquidity available in the market, the lower transaction costs and lower capital requirements, average investors prefer to indirectly invest in real estate. This is noticeable in countries where real estate investment trusts are operational.

Real estate is a challenging asset class due to its unique and heterogenic character, and it is typically traded between individual buyers and sellers making real estate an illiquid and non-transparent market. However, according to Hudson-Wilson, Fabozzi, and Gordon (2003), real estate asset has wide-ranging qualities; it is a good source of diversification, and a generator of attractive risk-adjusted returns through its low risk and high Sharpe Ratio. It offers opportunities of hedging against unexpected inflation and finally, real estate is regarded a strong cash flow generator through the income component of the return. Real estate return is based on the two elements: rental income and capital appreciation, the first refers to the housing rent, and the latter refers to the appreciation of the property value over time. Furthermore, real estate asset class can be divided into different sub-segments regarding type of investment and risk profile; Geltner, Miller, Clayton and Eichholtz (2007) classified real estate types into: residential, retail, office industrial, agricultural and plus a smaller sector of hotels and recreational buildings).

Globally, the profitability of investments in any country is highly dependent on the macroeconomics of the country. Macroeconomics deals with the behaviour of the whole (aggregate) economies or economic systems instead of the behaviour of individuals, individual firms, or markets (which is the domain of Microeconomics). Macroeconomics is concerned primarily with the forecasting of national income, through the analysis of major economic factors that show predictable patterns and trends, and of their influence on one another. These factors include level of employment/unemployment, gross national product (GNP), balance of payments position, and prices (deflation or inflation). Macroeconomics also covers role of fiscal and monetary policies, economic growth, and determination of consumption and investment levels.

Macroeconomics, fiscal policy, regulations and political stability affect investment rates of return. Large fiscal deficits reduce government flexibility and may result in higher borrowing costs for businesses. A gruelling regulatory approval process can hamper business investments in different sectors. Political stability creates investor and business confidence because there is more visibility into possible investment returns. Investors tend to avoid countries that change governments frequently or have civil strife. As the dynamics of the macroeconomics factors affect investment performances, it is obvious that these factors similarly affect returns of direct real estate investment globally. Pettinger (2017) also identified interest rates, economic growth, confidence/expectations, technological developments, availability of finance from banks, others (depreciation, wage costs, inflation, government policy) as major factors that affect investments.

The study is carried out to establish the global determinants of direct real estate investment returns in Nigeria with a view to elaborate how they affect real estate returns; and the following objectives are set to be achieved:

  • to determine the returns of residential and commercial real estate investment in Nigeria.
  • to identify the major economic factors that affect direct real estate investment returns in Nigeria, and
  • to examine the impacts of the identified economic factors on direct real estate investment returns in Nigeria.

Research Questions

  • What are the returns of residential and commercial real estate investment in Nigeria?
  • what are the major economic factors that affect direct real estate investment returns in Nigeria?
  • What are the impacts of the economic factors that affect real estate investment returns on direct real estate investment investments in Nigeria?


To read entire paper, click here


How to cite this paper: Awa, K.N., Nnametu, J., Emoh, F.I. (2019). Global Determinants of Direct Real Estate Investment Returns in Nigeria; PM World Journal, Vol. VIII, Issue X, November.  Available online at https://pmworldlibrary.net/wp-content/uploads/2019/11/pmwj87-Nov2019-Awa-Nnametu-Emoh-global-determinants-of-real-estate-returns-in-nigeria.pdf



About the Authors

Kalu N. Awa

Uyo, Nigeria




Kalu N. Awa is a Lecturer in the Department of Estate Management, University of Uyo, Nigeria. He holds a B. Tech. (Estate Management), M. Sc. (Estate Management) and M. Phil. (Environmental Management). He is presently running in the PhD programme in Estate Management at Nnamdi Azikiwe University, Awka, Nigeria. His research interests include Real Estate Management and Investment Portfolio Management.  He is an Associate member of The Nigerian Institution of Estate Surveyors and Valuers (NIESV) and a registered member of Estate Surveyors and Valuers Registration Board of Nigeria (ESVARBON). Kalu Awa can be contacted at kalunwojo4@gmail.com


Esv Jovita. N. Nnametu

Imo State, Nigeria.




Esv Jovita. N. Nnametu is a Lecturer and Head of Department in Estate Management and Valuation, Imo State Polytechnic, Umuagwo Ohaji. She has B.Sc and M.sc in Estate management and is currently rounding up her PhD research in Real Estate Investment Analysis  at Nnamdi Azikiwe University, Awka Anambra State, Nigeria. She has a career centred on teaching, training and mentoring of students for many years. She has published many journal articles and presented papers in both local and international conferences. Jovita is an active member of her local and international professional bodies and currently an Examiner for the professional body. She can be contacted on jnnametu@yahoo.co.uk.


Fidelis Ifeanyi Emoh

Imo State, Nigeria




Fidelis Ifeanyi Emoh, B.Sc. M.Sc. Ph.D. (Estate Management), PGD, MBA (Banking & Finance), FNIVS, MNIM, FIMC, CMC, is a Professor of Real Estate and Valuation in the Department of Estate Management at Nnamdi Azikiwe University in Awka, Nigeria.