Inflation Hedging Abilities of Residential Properties in Selected areas of Ibadan Metropolis, Nigeria

For long, investors perceived returns on real estate investments as a hedge against inflation;recently, while various empirical studies undertaken in some countries have produced varyingresults. In this study, the inflation hedging capacities of returns on residential property investmentsbetween the year 2002 and 2014 in selected areas in metropolitan Ibadan, Nigeria were empiricallyexamined to ascertain the uncertain inflation hedging abilities in the areas. The study employed theOrdinary Least Squares regression model to regress the rates of returns of the consideredresidential property investments against actual, expected and unexpected inflation. The inflationhedging capacities of real estate investments were found to vary across geographical sub-marketsand return components. Residential properties did not hedge against actual inflation in all theconsidered areas. However, with regards to expected inflation, the capital and total returns ofresidential properties in Akobo sub-market completely hedged; while for Bodija estate, it was theincome and total returns that hedged against inflation completely and partially respectively. Thestudy therefore recommends that in determining the real estate investments and the geographiclocations to integrate in residential property portfolio, property investors should concentrate morein the mentioned geographical areas where residential property investments have shown to behedging against inflation.