Abel Olaleye

Property market nature and the choice of property portfolio diversification strategies: The Nigeria experience

With a focus on the Nigerian property market, this paper considered and empirically analyzed how property market nature and the perception of market players of some qualitative factors have impacted on choice of property portfolio diversification strategies. Questionnaires, backed up with interviews, were administered on 28 institutional property investors and 159 real estate practitioners in three commercial nerve centres of Nigeria, namely, Lagos, Abuja and Port‐Harcourt metropolitan areas. The frequency distribution analyses’ results revealed that the Nigerian property market was an emerging one and, as it is expected, there was dearth of time series data while investors in the market were small time institutional investors. Using mean rating on a 4‐point rating scale, the study found six factors, arising from the nature of the property market, as the significant factors impacting on choice of diversification strategies. These are: the investors’ overall expectation of the benefits of diversification scheme, the need to reduce management operating costs, management convenience, operating environment, market players’ education and knowledge of alternative diversification techniques and availability or otherwise of data in the market. The result of cross tabulation and Chi‐square test also indicated that there was a statistically significant relationship between educational qualifications of practitioners and their choice of diversification strategies.

Factors influencing the choice of property portfolio diversification evaluation techniques in Nigeria

Purpose – The purpose of this paper is to examine the factors that have influenced the use of implicit (naive) techniques in property portfolio diversification evaluation in the Nigeria property market. This is necessitated by the need to look at the ways by which the property portfolio diversification evaluation practice in the market could be made to improve and adjust to ever changing global trends in this area.Design/methodology/approach – The authors of this paper administered questionnaires, backed up with interviews, on 28 institutional property investors and 128 real estate practitioners in three locations (commercial nerve centres) of the country, namely, Lagos, Abuja and Port‐Harcourt metropolitan areas. Data were analysed with the use of frequency distribution, mean and standard deviation measures, relative importance index and Pearson Chi‐Square test.Findings – The results of the study in this paper revealed, among others, that lack of time series data and the small size of many of the investo...

Integration between real estate equity and non-real estate equity

Purpose - – The paper examined the long-run relationship between real estate equity (property listed stock) and non-real estate equity (common stock) in the Nigerian capital market and established the integration between the investments. The paper aims to discuss these issues. Design/methodology/approach - – The data collected comprised quarterly returns on property listed stock and All Share Index for the period of January 1999-December 2011. The calculated quarterly returns of the investments were subjected to the Philip-Person unit root test after which the integration between the investments was analysed using the Johansson integration test. Findings - – The results showed that real estate equity performed better the non-real estate equity but with corresponding higher risk level. Also, real estate equity had a slightly lower performance when compared with non-real estate equity on return/risk ratio basis. The findings showed that property listed stock (real estate equity) was integrated with common stock or non-real estate equity and suggest that the Nigerian listed property stock, by nature, was similar to REITs. This result negates the belief that property listed stocks returns are integrated with direct real estate market and are often influenced by the returns of the underlying direct real estate assets. Practical implications - – The paper implied that while investors could consider investing in real estate equity and earn better return than investing in common equity in the Nigerian capital market, the inclusion of both in a domestic portfolio could be expected to bring little or no diversification benefit. Originality/value - – The paper is one of the few attempts at assessing the long-run relationship between property listed stock as a form of real estate equity and non-real estate equity and especially from African emerging market perspective.

EVALUATING MANAGERS DIVERSIFICATION OF REAL ESTATE PORTFOLIOS: EVIDENCE FROM NIGERIA

While there is evidence on the effectiveness of diversifying real estate portfolio geographically, or by property type, there is lack of empirical evidence to justify whether diversification of managers is worth pursuing. This study produces evidence on the effectiveness of diversifying by managers and property types. The study collected data on capital and annual rental values from three (3) main Property Investment and Development Companies in Lagos Metropolis, Nigeria. From the data so collected, annual total returns (IRR), on residential properties, for a period of between 1997 and 2001 on the managers’ portfolio were calculated. Under the assumptions that investments are held long and that constant correlation model or excess return to standard deviation represents the covariance structure of assets’ returns, the studys analyses suggest that diversification of managers and property types produce improved performance. It also opens the possibility that an efficient portfolio developed by using constant correlation analysis may not be more efficient than a naively diversified portfolio as some of the naive diversification strategies are found to be effectively efficient.

Resolving the data debacle in commercial property: are property practitioners in opaque markets ready for data sharing and assemblage

Purpose With a focus on Lagos, Nigeria property market, the purpose of this paper is to examine the willingness of property practitioners towards property data sharing and assemblage with a view to improving accessibility to commercial property data in Nigerian property market. Design/methodology/approach Primary data were sourced through the use of questionnaire administered on property practitioners (referred as estate surveying and valuation (ESV) firms) in Lagos property market. In total, 190 ESV firms were selected using stratified random sampling based on their geographical location, frequency distribution, percentage, and cross-tabulation were employed for data analysis. Findings The results showed that majority of the practitioners (68.1 per cent) were willing to share property data among themselves while 52.6 per cent of the practitioners were in support of data assemblage. The result also revealed the higher the experience of the practitioners, the more they are averse to data sharing. It was also revealed that the bigger firm are more averse to data assemblage than the smaller firms. Meanwhile, majority of the practitioners (93.3 per cent) were in support of creation of a central database. Practical implications The study concluded that without the willingness of practitioners to support data assemblage, the data debacle in property market might not be resolved. Originality/value The paper is an attempt towards the possibility of creating database of concluded transactions, which will improve accessibility to property data in opaque property market.

The effects of adding real estate into mixed‐asset portfolios in South Africa

Purpose – The purpose of this paper is to examine the performance of asset classes in the South African investment market and assess the diversification benefits from adding listed property stock into domestic mixed‐asset portfolios.Design/methodology/approach – The data sets comprise of quarterly returns on property listed stock, all share, all bond and 90 day Treasury bill for the period of January, 1999 to December, 2009. Return‐risk performance of all the assets were compared using mean return, standard deviation, mean standard deviation ratio, coefficient of variation and correlation coefficient. To determine return enhancement and risk reduction benefits of property listed stock in mixed‐asset portfolios, 22 naive portfolios (17 with property stock and five without) were constructed and, their return and risk levels, obtained using Markowitzs mean variance analysis, were compared.Findings – The results showed that there was evidence of superior return and risk‐adjusted performance of real estate st...

Homeowners' perception of insurance of real estate development in Lagos, Nigeria

Purpose – The purpose of this paper is to examine the views held of property insurance by homeowners in Ire‐Akari and Ikeja areas of Lagos State in Nigeria. This is with a view to establishing the factors that are responsible for lack of insurance culture in these areas in particular and also Nigeria in general.Design/methodology/approach – Questionnaires were administered on 485 homeowners, selected through systematic random sampling techniques in the two areas studied. The first building along the major street in the areas was selected randomly and every tenth building formed the subsequent unit of investigation. A household head/owner was surveyed in each of the building selected. Data were analysed with the use of frequency distribution, mean and standard deviation (SD) measure and Chi‐square test.Findings – The results showed that 62.9 per cent of the total respondents agreed that property insurance was essential. However, only 40.3 per cent of the homeowners claimed to have insured their properties ...

Bridging skill gap in real estate education in Nigeria

Abstract Purpose: The importance of education is always underscored without adequate demonstration of skill(s) for practice. Appropriate professional skills guarantees efficient real estate investment decision making and prevents loss of investment fund. The study evaluated, from the perspective of employers of labour, the effort of the government, through students, industrial scheme, at bridging skill gaps in real estate education in Nigeria. Design Methodology/approach: Primary data were collected with the aid of questionnaire served on 270 estate surveying and valuation firms in Lagos state, Nigeria. The descriptive methods of mean and proportion method were used to determine the contribution of government industrial scheme to real estate education in Nigeria. Findings: The result found that through the student industrial scheme, students acquired experience/skill in real estate marketing as well as the art of team work. Originality/Value: The paper is to serve as impetus to policy makers to enhancing the quality of real estate in Nigeria. It will also serve as proof to foreign investors of the quality of Nigerian real estate practitioners to give them efficient service.

Convergence between direct and indirect real estate investments: Empirical evidence from the Nigerian real estate market

Purpose This paper aimed to examine the return/risk performance of direct and indirect real estate (listed property stock) in the Nigerian real estate market and analyzed the short-term integration between the two classes of real estate assets. It also established whether investors could achieve diversification benefits by combining both assets in a portfolio. Design/methodology/approach The data utilized comprised annual returns on direct real estate calculated from the rental and capital values of 226 direct commercial properties obtained from property valuers in Lagos, Nigeria, for a period of January 1999-December 2014. The appraisal-based direct real estate returns were de-smoothed using the Geltner (1993) procedure. The annual returns of indirect real estate were also computed from the transactions of listed property stock on the Nigerian Stock Exchange for the study period. The return-risk profiles were also broken down into short- and medium-term sub-periods, comprising 3, 5, 8 and 12 years to reflect the level of volatility in the market, whereas the nature of the short-term relationship between the two real estate assets classes was tested using Granger causality technique. Findings The results revealed that listed property stock performed better than unsmoothed direct real estate on a risk-adjusted performance basis. The performance profile, however, varies over the different sub-periods considered. Short-term integration analysis showed that there was no bidirectional relationship between direct and listed property stock, implying diversification and risk reduction possibilities in combining both assets with other asset classes in a domestic asset portfolio. Overall, the results confirm the findings of previous study that listed property stocks return is segmented from the direct real estate market upon which its pricing and trading in the stock market are based. Practical implications The conclusion of the study suggests that investors could achieve improved performance by investing in listed property stocks than direct real estate in the Nigerian real estate market. The inclusion of both assets in a domestic mixed-asset portfolio could also be expected to offer diversification and risk reduction benefits. Originality/value This is one of the few studies that examine the short-run integration between direct real estate and listed property stocks with a focus on an emerging African market.