Forecasting return of commercial property in South Africa using macroeconomic factors
Date
2012-01-04
Authors
Chan, Kam Hay Claren
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Abstract
The forecasting ability of the macroeconomic factors upon South African commercial
property return is investigated in this research. Such research is still very novel in South
Africa and only Brooks and Tsolacos (2003) has recently investigated this relationship with
several European markets. In this research, both direct property returns (IPD) and indirect
property returns (J255 and J256) are investigated. The macroeconomic factors that are
identified to have some influence on commercial property return are term structure, giltequity
ratio, employment index, building plan passed and changing inflation rate (CPIX
index). Four different types of models were investigated, namely the univariant ARMA
model, the univariant GARCH model, the VAR model and the MLP neural network model.
The optimal model for each type is identified using AICc and BIC information criterion
techniques. The optimal models are then used in long-term forecasting and short-term
forecasting. The ARMA model and the neural network were identified to best predict indirect
and direct property returns, respectively