Research
An Analysis of Relative Inflation Hedging Capacities of Prime Commercial Properties in Lagos
The major concern to any investor is the achievement of the desired return of investment as well as his return on investment. Real estate has an age long reputation of being perceived as a hedge against inflation, a fact for which various empirical studies undertaken in some other countries have produced varying results. In this line, the study was aimed at empirically establishing the inflation hedging properties (or otherwise) of commercial properties in prime locations of Lagos state. To achieve this, the Ordinary Least Square model as proposed by Fama and Schwert (1977) was used to regress real estate rates of returns against actual, expected and unexpected inflation rates. The results show that, for prime locations around Victoria Island and Ikoyi, commercial properties provide a perverse hedge against actual inflation, Whereas, commercial properties within Ikeja and environs have been seen to present a complete hedge against actual inflation.
