ABSTRACT
This study examined the
effect of location on the rental value of residential properties in Ikeja Local
Government Area in Lagos State.
Data used were derived mainly from secondary
sources such as documents, including published literature, official documents,
and media reports. Primary data were obtained from questionnaires administered
to registered Estate Surveyors and Valuers, Estate Agents, landlords and
residents of the study area.
The purpose of the study
is to analyse and determine the roles of location and neighborhood
characteristics in the determination of rental value of residential properties,
in other to achieve this, attempts were made to evaluate the role of location
and neighborhood factors in the determination of house prices in the conceptual
background to this study.
The second chapter also
examined the various property characteristics that have relatively strong
impact on market values (prices) and to an extent influence the rent, sales and
purchase decisions of accommodation seekers, sellers and buyers in Nigeria.
The third chapter sets
out the method and procedure employed in carrying out this project. The fourth
chapter presents the results of the empirical and comparative analyses of the
effect of location on the value of residential properties in Ikeja Local
Government Area of Lagos State.
It is concluded that
neighborhood and location attributes show more importance on house values when
smaller geographical housing units are examined. The recommendations of this
study should enable individuals, Real Estate Professionals, investors and other
stakeholders to make fair estimates of the market values of residential
properties in Ikeja Local Government Area of Lagos State given the features of
such housing units. This would aid rapid valuation, help to improve housing
quality and make possible mass evaluation of properties.
TABLE
OF CONTENTS
Title page i
Certification ii
Dedication iii
Acknowledgements iv
Abstract
v
Table of Contents
vi
CHAPTER ONE: INTRODUCTION
1.1
BACKGROUND TO THE STUDY
1
1.2 STATEMENT
OF PROBLEM
2
1.3 AIM
OF STUDY
3
1.4
RESEARCH QUESTIONS 3
1.5 OBJECTIVES OF STUDY 3
1.6 SIGNIFICANCE OF STUDY 4
1.7 SCOPE OF STUDY 4
1.8 OPERATIONAL
DEFINITIONS 4
CHAPTER TWO:
2.1 INTRODUCTORY REVIEW 6
2.2.1 CONCEPT
OF VALUE 6
2.2.2 FORMS OF
VALUE
7
2.2.3 TYPES OF
VALUE 7
2.2.4 RESIDENTIAL
PROPERTY VALUE DETERMINANTS 8
2.2.5 FACTORS
AFFECTING RESIDENTIAL PROPERTY VALUE 10
2.2.6 LOCATION
AND URBAN LAND VALUES
11
2.2.7 FEATURES
OF LOCATION THAT CAN AFFECT PROPERTY VALUES
12
2.3.1 DEFINITION
OF PROPERTY
12
2.3.2 CLASSIFICATION
OF PROPERTY 13
CHAPTER
THREE
3.0 RESEARCH
METHODS
19
3.0 INTRODUCTION
19
3.1 STUDY AREA
19
3.2 POPULATION OF THE STUDY 19
3.3 SAMPLE SIZE
20
3.4 POPULATION CHARACTERISTICS 20
3.5 TYPES AND SOURCES OF DATA 20
3.5.1 PRIMARY
IN FORMATION AND SOURCE 20
3.5.2
SECONDARY INFORMATION AND SOURCE 20
3.6 SAMPLING
TECHNIQUES
20
3.7 RESEARCH INSTRUMENT OF THE STUDY 21
3.8 STATISTICAL ANALYSIS METHOD 21
3.9 STATISTICAL TOOLS 21
CHAPTER FOUR
4.0 DATA PRESENTATION, ANALYSIS AND INTERPRETATION 22
4.1: RESPONSE
OF THE LANDLORDS AND TENANTS 23
4.2: PRESENTATION OF THE RESPONSE OF THE ESTATE SURVEYOR 32
4.3 DISCUSSION
OF FINDINGS OF THE STUDY 38
CHAPTER
FIVE
SUMMARY,
CONCLUSIONS AND RECOMMENDATIONS
5.1 SUMMARY OF THE STUDY 39
5.2 CONCLUSION
39
5.3 RECOMMENDATIONS
40
REFERENCE
APPENDIX
LIST
OF TABLES
` PAGE
4.1: RESPONSE
OF THE LANDLORDS AND TENANTS 23
4.2: PRESENTATION
OF THE RESPONSE OF THE ESTATE SURVEYORS 32
CHAPTER
ONE
INTRODUCTION AND BACKGROUND
1.1 BACKGROUND TO THE STUDY
Residential properties
are both consumption and investment good (Sratton, 2008). As consumption good
it is acquired for owner occupation.
Also, the investment
(property) may be to maximize optimum return from outright sale or letting. If
this is the case, the price of the residential property becomes very important
to the landlord and the occupants.
Hence investment in this
type of property is regarded as a considerable source of wealth for many
individuals. The physical
characteristics of the property such as number of bedrooms, age, size, various
amenities and services have been noted to help determine the rental price for
landlords as they set rental prices for residential properties.
In addition, external
factors such as population, income, traffic congestion, proximity to work,
access to public transportation, proximity to higher institution and
environmental characteristics may have significant impacts on rent (Oni, 2007).
Therefore, any serious
investigation into the nature and behavior of residential property price should
recognize that property as a commodity is not a single good, but a complex
bundle of services or potential services which operate in many dimensions
(Oyebanji, 2003).
Nigeria has a large real
estate market that is untapped due to limited circulation of information about
property characteristics, their actual value and their impact on market values,
organizations, available properties and professional services available in
various locations nationwide.
As real estate
consultants and practitioners market their properties, they recognize that in
order to generate success, their information must be well circulated and this
information should be available, accessible, reliable and affordable to the
property buyers, sellers and investors with speed, precision, accuracy and at
the magic moment when the client needs the information.
The impact of location in
housing market is very significant. Since housing units are fixed in location,
they differ in terms of their surroundings, the kind of community in which they
are located, and their nearness to employment and shopping places. Location
also means that a dwelling's surrounding is possibly of great importance in
affecting its value.
For decades, real estate
property was generally seen as a legacy a parent bequeaths to the offspring.
However, with the realization that real estate is a major source of capital
appreciation and a good hedge against inflation, the real estate market is
coming close in popularity and importance to the money and capital markets.
Today, real estate property
constitutes a significant index in man’s wealth. As economic activities have
achieved more sophistication over time, real estate has continued to play a
central role in their development.
In Lagos State , the
rental values of
residential properties has shown an upward pattern over the years.
This is because Lagos is the largest city in Nigeria, located along the West
African coast. The entire Lagos metropolis has 9,197 roads consisting of
carriageways, cul-de-sac, lanes, streets, avenue, ways, and crescents (Lagos
Street, Map, 2008).
Besides, the huge financial transactions involved, high property demand, the ever
increasing population and the limited supply mainly in major cities such as Lagos, Ibadan, Abuja and Port
Harcourt has made the real estate sector susceptible to abuse by many dishonest property developers, greedy landlords,
unregistered agents and swindlers who engage in several illegal practices to
the detriment of the practitioners, citizens, foreigners, stakeholders and the
noble profession (Agunbiade, 2013).
In recent past, investors
have diverted their funds into real property development because of the
security of returns and the profitability of the market (Kauko, 2003).
In addition, because of the high competition
in the residential property market, there has been expansion and improvement in
the quality of residential properties provided by the investors to meet demand.
A number of factors
affect residential property values in Nigeria. These include location, demand
and supply, accessibility, institutional, economic factor among others.
Nevertheless, there is still a short fall in the market leading to increase in
rent and capital values (Eriki & Udegbunam, 2008).
Regardless of these advantages, real estate
practitioners, financiers and investors in residential properties are faced
with dearth of data on the effect of location on the value of residential
properties and what level of rental income a development project could
reasonably be expected to realize in a transaction involving willing and able
parties.
1.2 STATEMENT OF PROBLEM
Real estate has contributed to the growth
and development of the Nigerian economy despite that the sector has continued
to face challenges such as poor funding, poor infrastructure, high cost of
building materials, lack of government policies and unethical standards.
The problem this study
seeks to solve is to analyse and determine the relative roles of location and
neighborhood characteristics in the determination of residential properties
value in Ikeja L.G.A in Lagos State.
Another problem is to determine the practical
model for the valuation of residential housing units in Nigeria property
market.
Also, this study will
identify the property features that have significant influence on property
market values using primary and secondary sources.
In addition, this study
will determine if location is a major factor in residential property valuation
in Nigeria and the cumbersome bureaucratic delay associated with obtaining land
and government approval in relation to property development.
These will be achieved
through the measurement of primary and secondary data with the aim of providing
professionals, investors and stakeholders with valuable information.
1.3 AIM OF STUDY
The aim of this study is
to analyze and examine the effect of location on the rental value of
residential properties in Ikeja L.G.A in Lagos State.
1.4 RESEARCH QUESTIONS
The following research
questions were asked in order to provide scientific framework for this study:
1. What are the factors that affect residential properties in
Ikeja?
2 What role does location play in the
determination of rent of residential properties in Ikeja?
3. What is the correlation between property market values and
location?
4. What are the implications of these determinants and policy
maker on investor’s decision?
1.5 OBJECTIVES OF STUDY
The objectives of this
study are:
1. To determine various location factors
affecting residential properties in the study area.
2. Examine rental values determinants of
residential properties in the study area.
3. Examine relationship between location and
residential property values in the study area.
4. Suggest how the real estate investors and
policy makers can reap optimally from locational advantages.
1.6 SIGNIFICANCE OF STUDY
This study will
contribute to the body of knowledge that are available in both print and
broadcast media. Also, it will serve as a reference material for students, scholars
and other researchers on the effect of location on rental values of residential
properties.
In addition, it will help
individuals, professionals, investors, communities, change agents, media
professionals and the society at large on how to identify residential property
characteristics and how they affect property values in Nigeria.
Also, this study will help researchers,
scholars and investors to identify various residential property characteristics
that have relatively strong impact on market values (prices) and to an extent
influence the sales and purchase decisions of sellers and buyers in Nigeria.
This study should enable real estate professionals
and investors to make fair estimates of the market values of residential real
estate properties given the features of such housing units. This would aid
rapid valuation, help to improve housing quality and make possible mass
evaluation of properties.
1.7 SCOPE OF STUDY
The study focus on
residential properties in Ikeja L.G.A, Lagos State. Ikeja is home to a large
number of residential housing units. The study centered on Ikeja as a location,
to examine its effect on rental values of residential properties. So many
attributes constitutes a location like accessibility, facilities provision,
environmental aesthetics, security, business opportunities.
Preliminary study
revealed that there are different types of residential properties in the study
area. These are Terrace building, Maisonette, Bungalow, Block of flats,
Tenement.
Due to the magnitude,
terrain and complex nature of Lagos State, the study will focus on residential
properties in Ikeja intra-city. Ikeja is the predominant component of Ikeja
Local Government, which itself is one of four zones identified within the
larger Lagos metropolis. The four zones (Lagos Island, Apapa, Lagos Mainland,
and Ikeja) represent commercial hubs of Lagos metropolis, which as revealed by
preliminary observation, shows activity areas where employment, commercial,
transportation terminals, and other businesses are concentrated (Oni, 2008).
1.8 OPERATIONAL DEFINITIONS
PROPERTY: anything, tangible
or intangible whereby legal relationship exist between a person and the State
enforces a possessory interest or legal title in that thing (Famuyiwa 2012)
RESIDENTIAL PROPERTY: The
classes of dwelling units which provide shelter. It is also the building used
substantially as living accommodation.
RENTAL VALUE: This is the
monetary returns an investment is expected to command in a year (Babawale 2013)
PROPERTY MARKET: This is a medium where
bundles and cluster of rights and interests that exist in property (land and
landed properties) are being exchanged.
LOCATION: This is an
economic characteristic of real estate composed of immobility, constant change
and element of special distribution (Wikipedia 2015)
VALUE: The present value
or worth of future benefits. It is also the money obtainable from a person
willing and able to purchase an article when offered for sale by a willing
seller during a reasonable time of negotiation (Babawale 2013)
LAND: This can be defined
as the uppermost layer of the earth crust, things attached to it either
temporary or permanently beneath or above that can be developed to generate
income and interests.
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