Does Macroeconomic Fundamentals Influence Real Estate Investment Trust Scheme (REITs) Returns in South Africa?

Abstract

This study examined the nexus between volatilities in macroeconomic fundamentals and real estate investment trust scheme (REITs) returns in South Africa within the period 2013-2022. The specific objectives of this study were to determine the link between credits to private sector; gross domestic product (GDP); inflation rate (IFR); volatility in interest rates (VIR); exchange rate fluctuation (EXRF); and money supply changes (MSUP) and stock returns of REITs in South Africa. To examine the cause-effect relationships between the dependent variable and independent variables, the study employed the panel fixed and random effect regression technique to analyse panel data set obtained from Id Ratios Nigeria, compiled from the relevant statistical records including the selected stock exchange fact books and concerned firms’ annual financial reports for the period. The findings reveal that credit to the private sector (CRPS), Inflation rate (IFR), volatility in interest rate (VIR), exchange rate fluctuations (EXRF) and money supply (MSUP)had significant positive effects; while GDP growth (GDPG) did not record a significant effect on REITS returns in South African. The study concludes that unlike in more developed markets where a healthy GDP growth plays a crucial role in asset returns and often boosts investor confidence other factors especially money supply, inflation and exchange rate fluctuation had more influence in shaping REITs performance in emerging market of South Africa. Among others, the study strongly recommends that corporate managers should structure investment portfolios that include inflation-resistant assets such that could enhance stability and attract investors seeking to hedge against inflation