INFLUENCE OF MACROECONOMIC VARIABLES ON FINANCIAL PERFORMANCE OF COMMERCIAL REAL ESTATE MARKET IN KENYA
Abstract
The real estate industry plays a very important role in the economy. The industry has increasingly attracted the attention of investors in the recent past. Kenya’s real estate industry is expected to remain strong in coming years. This has not been the case and thus this study sought to establish the effects of macroeconomic variables on the financial performance of commercial real estate market in Kenya given they are key in the growth of the country’s economy. The study was carried out through a descriptive research design. The measure of performance of the real estate companies was measured against the macroeconomic variables such as economic growth, inflation, interest rate, and exchange rate. The study found that GDP growth and performance of commercial real estate market in Kenya had a positive and significant relationship. The study also found that inflation and performance of commercial real estate market in Kenya had a negative and significant relationship. The study further found that interest rates had insignificant influence on the performance of commercial real estate market in Kenya. Also, the study revealed that exchange rates had positive and significant influence on the performance of commercial real estate market in Kenya. The study concluded that inflation rate has a substantial influence on the financial performance of the real estate market. Inflation reduces the value of money and hence does not favor the performance of real estate market. Also, the study concluded that exchange rate has significant influence on the financial performance of real estate market and that a unit increase in GDP growth will lead to an increase in economic growth which will stimulate investment in real estate market, hence there is positive correlation between GDP growth and the performance of real estate market. The study recommended that government should aim at controlling inflation rate in Kenya by making it generally constant at a low level.
Key Word: Macro Economy, Economic Growth, Inflation, Interest Rate, Exchange Rate
CITATION: Keillah, M., & Oluoch, O. (2018). Influence of macroeconomic variables on financial performance of commercial real estate market in Kenya. The Strategic Journal of Business & Change Management, 5(4), 2170 - 2179.
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DOI: http://dx.doi.org/10.61426/sjbcm.v5i4.1017
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