AN ANALYSIS OF REAL ESTATE INVESTMENT YIELDS

Abstract

Investment return/yield provides the principle criterion for most investment decisions. In the case of real estate investment, the yield can also provide a basis for income approach to valuation. This dissertation seeks to ascertain the yields of real estate investment in the single year period from mid 1983 to mid 1984. The results of the analysis show that real estate yields tend to fluctuate and vary widely, depending on the type and location of the property. The factors which attribute to such variations will be discussed in detail in the analysis of results. A yield of 5.2% has been obtained from office investment compared to the 4.9% obtained from shops. On the other hand, investment yields of residential properties are generally lower than the commercial properties. Yields of 4.3%, 3.7%, 3.5% and 3.0% have been obtained for apartments, terrace houses, semi-detached houses and bungalows respectively. When compared to other investment opportunities, real estate investment has been regarded as a good hedge against inflation. The prospect of future capital growth makes real estate an ideal medium of investment, in spite of the fact that a lower yield has been obtained from the analysis. This indicated that investors in real estate are more for capital appreciation than for immediate return of income.