Macroeconomic Variables and Real estate returns: An international Comparison

Abstract

The relationship between property returns and the macro economy is important to investors' strategies. Pattern analysis based on correlation models reveals the ongoing macroeconomic links with major international property markets. In this study, gross domestic product, unemployment, and inflation were identified as leading macroeconomic determinants affecting Australian, Canadian, U.K., and U.S. commercial property performance during 1985-1999. These macroeconomic links with commercial property returns revealed that over time, the economic relationships with property returns varied, generally becoming weaker while the relationship lead time increased. This shift suggests that explanatory powers are not uniform across global markets.