Macroeconomic Determinants of BRICS Property Market Returns: A Regime-Switching Approach
DOI:
https://doi.org/10.37075/FABA.2026.1.14Keywords:
BRICS, Macroeconomy, Bull and Bear Markets, Property Returns, MarkovAbstract
Purpose: The aim of the study was to examine the effect of macroeconomic variables on Brazil, Russia, India, China and South Africa’s (BRICS) property market returns under changing market conditions.
Design/methodology/approach: The study utilised a Markov regime-switching model for the period February 2011 to June 2025. The dependent variables comprised BRICS’s property market returns, whereas the independent variables consisted of domestic inflation growth rate, gross domestic product growth rate and interest growth rate of each BRICS nation.
Findings: The findings revealed that macroeconomic variables have a regime-specific effect on BRICS’s property market returns in bull and bear market conditions. That being said, inflation growth rate had a negative significant effect on Brazil’s, India’s and South Africa’s property returns in a bull market condition, whereas in the bear market condition, only India’s returns were negatively affected. Similarly, gross domestic product (GDP) had a negative significant effect on Russia’s and China’s property returns in a bull market condition, whereas in the bear market condition, the effect was insignificant. In contrast, interest growth rate had only a negative significant effect on South Africa’s and Brazil’s returns in bull and bear market conditions, respectively. The transition probabilities revealed that the bear market condition dominated BRICS property market returns, illustrating that the returns were decreasing across the sample period.
Practical implications: Collectively, the study presents important implications for policymakers and investors, such that monetary policy adjustments and investment decisions must factor in the state of the property market, as bull and bear periods dictate the return perspective that influences investors and policymakers’ decisions.
Originality/value: The study contributes to the literature by providing a comprehensive asymmetrical analysis of macroeconomic fundamentals’ influence on BRICS’s property market return. Unlike previous studies that focus predominantly on the linear effect, this study highlights the nonlinear perspective between macroeconomic and property market returns, offering nuanced insights for policymakers and investors.
Paper type: Research paper
Downloads
References
Anderson, R., V. Boney, and H. Guirguis. 2012. The Impact of Switching Regimes and Monetary Shocks: An Empirical Analysis of REITs. Journal of Real Estate Research, 34 (2): 157–182. https://doi.org/10.1080/10835547.2012.12091332
Apergis, N. 2003. Housing Price and Macroeconomic Factors: Prospects within the European Monetary Union. International Real Estate Review, 6 (1): 63–74.
Bansal, P., S. Bertels, T. Ewart, P. MacConnachie, and J. O'Brien. 2012. Bridging the research–practice gap.
Belo, M., and A. Abgatekwe. 2002. Project Management in Property Development: The Nigeria Experience. Ibadan: University Press PLC.
Bernanke, B., and M. Gertler. 1995. Inside the Black Box: The Credit Channel of Monetary Policy Transmission. Journal of Economic Perspectives, 9 (4): 27–48.
Baumann, K., F. Moodley, and S. Ferreira-Schenk. 2026. The effect of investor sentiment on South African bank returns: A comparative analysis of economic conditions. Journal of Business and Environmental Sciences, 2(5): 105-127.
Brooks, C. 2019. Introductory Econometrics for Finance. New York: Cambridge University Press.
Brooks, C., and S. Tsolacos. 1999. The Impact of Economic and Financial Factors on UK Property Performance. Journal of Property Research, 16 (2): 139–152.
Caldara, D. and Iacoviello, M. 2022. Measuring geopolitical risk. American economic review, 112(4): 1194-1225.
Camacho, M., G. Perez-Quiros, and P. Poncela. 2018. Markov-Switching Dynamic Factor Models in Real Time. International Journal of Forecasting, 34 (4): 598–611.
Case, K., and R. Shiller. 1989. The Efficiency of the Market for Single-Family Homes. American Economic Review, 79 (1): 125–137.
Chan, S.H., J. D. Martin, and J. W. Kensinger. 1990. Corporate research and development expenditures and share value. Journal of Financial Economics, 26(2): 255-276.
Chen, K., and D. Tzang. 1988. Interest-rate sensitivity of real estate investment trusts. Journal of Real Estate Research, 3(3): 13-22.
Chen, N., R. Roll, and S. A. Ross. 1986. Economic Forces and the Stock Market. Journal of Business, 59 (3): 383–403.
Erol, I., and A. Ileri. 2013. What Determines REIT Returns in Turkey? Iktisat Isletme ve Finans, 28 (331): 9–32.
Fama, E., and G. W. Schwert. 1977. Asset returns and inflation. Journal of financial economics, 5(2): 115-146.
Dlamini, C.S. 2017. The relationship between macroeconomic indicators and stock returns: evidence from the JSE sectoral indices. Unpublished master’s dissertation. South Africa: University of the Witwatersrand.
Fama, E. 1990. Stock Returns, Expected Returns, and Real Activity. Journal of Finance, 45 (4): 1089–1108.
Fraser, W. D. 1993. Principles of Property Investment and Pricing. London: Macmillan.
McCue, T., and J. Kling. 1994. Real estate returns and the macroeconomy: some empirical evidence from real estate investment trust data, 1972-1991. Journal of Real Estate Research, 9(3): 277-287.
Glaeser, E., J. Gyourko, and A. Saiz. 2008. Housing Supply and Housing Bubbles. Journal of Urban Economics, 64 (2): 198–217.
Ghent, A.C., and M. T. Owyang. 2010. Is housing the business cycle? Evidence from US cities. Journal of Urban Economics, 67(3): 336-351.
Hamilton, J. D. 1989. A New Approach to the Economic Analysis of Nonstationary Time Series and the Business Cycle. Econometrica, 57 (2): 357–384.
Hoesli, M., B. MacGregor, G. Matysiak, and N. Nanthakumaran. 1997. The Short-Term Inflation-Hedging Characteristics of UK Real Estate. Journal of Real Estate Finance and Economics, 15 (1): 27–57.
Hoskins, N., D. Higgins, and R. Cardew. 2004. Macroeconomic Variables and Real Estate Returns: An International Comparison. The Appraisal Journal, 72 (2): 163–170.
Iacoviello, M. 2005. House Prices, Borrowing Constraints, and Monetary Policy. American Economic Review, 95 (3): 739–764.
Lin, P. 2022. Do Macroeconomic Factors Matter in Housing Markets? Paper presented at the 28th Annual European Real Estate Society Conference, Milan, Italy.
Ling, D., and A. Naranjo. 1997. Economic Risk Factors and Commercial Real Estate Returns. Journal of Real Estate Finance and Economics, 14 (3): 283–307.
Mayekiso, M., and F. Moodley. 2026. The effect of investor sentiment on returns of JSE size-based indices under changing market conditions: Evidence from a Markov regime-switching model. Economics, Management and Sustainability, 11(1): 116-135.
McGough, T., and S. Tsolacos. 2001. Do Yields Reflect Property Market Fundamentals? Journal of Property Research, 14 (2): 102–114.
Mehrling, P. 1999. The vision of Hyman P. Minsky. Journal of Economic Behavior & Organization, 39(2): 129-158.
Moodley, F., and B. Lawrence. 2026. The impact of market dynamics and geopolitical uncertainty on property return: A comparative analysis of BRICS countries. Risks, 14(3): 55.
Moodley, F. 2026. The effect of geopolitical risk on South African government bonds returns: a Markov regime-switching framework. EUREKA: Social and Humanities, (2): 21-32.
Quan, D., and S. Titman. 1999. Do Real Estate Prices and Stock Prices Move Together? Real Estate Economics, 27 (2): 183–207.
Wahab, M. B., A. S. Adeogun, G. B. Morenikeji, M. Mammah, and S. O. Abdulkareem. 2017. Effect of Macroeconomic Factors on Residential Property Returns in Abuja, Nigeria. LAÜ Sosyal Bilimler Dergisi, 8 (2): 133–149.
Yunus, N. 2012. Modeling Relationships among Securitized Property Markets, Stock Markets, and Macroeconomic Variables. Journal of Real Estate Research, 34 (2): 127–156.
Published
How to Cite
Issue
Section
