Effects Of Macro-Economic Variables On Real Estate Investment In Mombasa County, Kenya

Abstract

The research objective of the study was to investigate the effects of macro-economic variable on real estate investment in Mombasa County. Descriptive research design was used. Real estate investment was measured against interest rate, GDP and inflation rate. The study employed quarterly secondary data. Data for both the dependent and predictor variables were obtained from the CBK and KNBS websites for the period spanning between years 2006 to 2015. To achieve the objectives of the study, regression analysis was conducted whereby real estate investment was regressed against the predictor variables: interest rate, GDP, and inflation. The study established a negative correlation between real estate investment in Mombasa County and the selected macro-economic variables. The correlation between interest rate and investment was found to be negative with a value of -0.95 implying that an increase in interest rate results to a decrease in the real estate investment. Additionally, the correlation between inflation and investment was found to be negative with a value of -0.181 implying that an increase in inflation leads to a decrease in real estate investment. Lastly, the correlation between GDP and investment was found to be negative with a value of -0.157 implying that an increase in GDP leads to a decrease in investment. The study concluded that the selected macro-economic variables had no effect on real estate investment in Mombasa County. This is because the p-value was found to be 0.469 which is greater than the significant level of 0.05 meaning, the effect of the selected macro-economic variables on real estate investment in Mombasa County was insignificant. The study recommends that since the selected macroeconomic variables were found to cater for a relatively small percentage of the model variability, it would be prudent to conduct a study to determine the other factors that influence real estate investment in Mombasa County. In addition, the study recommends that real estate investment decisions be taken in a broader perspective so as to incorporate other factors that significantly influence real estate investment in Mombasa County. Also, with the regional integration, it would be interesting to replicate this study in other countries in the Great Lakes Region.