Show simple item record

dc.contributor.authorODHIAMBO, Austine. Ogutu
dc.date.accessioned2022-12-20T14:08:29Z
dc.date.available2022-12-20T14:08:29Z
dc.date.issued2022
dc.identifier.urihttps://repository.maseno.ac.ke/handle/123456789/5587
dc.description.abstractReal estate as an investment has continued to form an important part of investments held by both retail and institutional investor’s portfolio over the years. This has been attributed to its ability to generate continuous income streams as well as capital appreciation of the underlying asset. Notwithstanding these benefits, real estate investments in Kenya have been faced with challenges such as increased cost of credit through fluctuating interest rates owing to real estate being mostly financed by debt hence unstable interest rates can affect their performance. Real estate as an investment has been susceptible to booms and bust and erratic exchange rates which affect the value of investments made by both local investors and remittances from abroad from time to time which results in either inflated property prices which get out of reach of common retail investors or lack of demand for investors in a market facing glut. Over the years inflation has been rising steadily with each investor becoming more interested on how this might affect their real return. Real estate which is heavily leveraged has also been prone to changes in the interest regime in the economy which affects the cost of borrowingIt is upon this that the study was conducted to establish the state of connection between the performance of real estate investment from a price and return perspective. The study concentrated on inflation, the interest rate regime and the state of exchange rate and drew conclusions based while referencing finance and economic theory. The study focused on the weighted interest rates used in lending by commercial banks, inflation rates exchange and the existing relationship with the financial performance of real estate investments. The study was anchored on the four quadrant model to show how real estate sector demand and supply works out. The study used Arbitrage Pricing theory to show how real estate performance is influenced by macro-economic factors. Lastly the study used the Efficient Market Hypothesis to show that real estate prices and market is efficient. The research adopted a post positivist research philosophy and was guided by a correlational research design. The target population for the study was 40 quarters of interest rates, housing price index from Kenya Bankers, inflation rate, exchange rate and growth of real estate sector in Kenya. The macro economic data for the study was retrieved from Kenyan National Bureau of Statistics between 2012Q1 and 2021Q4. The results from the study showed that in the long run, inflation had a significant influence (b=2.058), exchange rate had a significant negative influence (b= -2.017), interest rate had a significant positive influence (b=8.166) respectively on real estate residential property prices. On the same note in the long run exchange rate had a significant negative influence (b= -0.0043), inflation had a significant positive influence (b=0.001268), and interest rate had a significant positive influence (b=0.0043) respectively on real estate sector growth. The short run relationship showed that interest rate, exchange rate and inflation had a significant relationship with real estate residential prices. The study however established that there was no significant short run relationship between exchange rate, inflation and interest rate with real estate sector growth. The speed of correction back to equilibrium for real estate residential and real estate growth were negative and significant at 46.4% and 31.4% respectively. The study recommended investors to have their portfolios diversified by investing in real estate to hedge against inflation. Since real estate was established to be interest rate sensitive, the study recommended investors to limit bonds which are also interest rate sensitive in portfolios that have real estate. Lastly the study recommended investors to protect their portfolios from exchange rate risk through investing in futures contracts which cancel out any adverse changes in the exchange rate regime in the country.en_US
dc.publisherMaseno Universityen_US
dc.titleAnalysis of inflation, interest rate, exchange rate and financial performance of real estate investment, Kenyaen_US
dc.typeThesisen_US


Files in this item

Thumbnail

This item appears in the following Collection(s)

Show simple item record