THE EFFECTS OF FLUCTUATION IN THE VALUE OF NAIRA ON RENTAL VALUE OF COMMERCIAL PROPERTIES

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Product Category: Projects

Product Code: 00000632

No of Pages: 113

No of Chapters: 5

File Format: Microsoft Word

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ABSTRACT

 

In recent time rental value of a property has been an unsustainable increase particularly commercial properties. This was attributed to the fluctuation in the purchasing power of naira cause by socioeconomic forces.

This project seeks to examine the effect of fluctuation in the value of naira on rental value of commercial properties in Lagos Island by examining the causes of fluctuation in the value of naira on rental value of commercial properties, the trends in rental value of commercial properties and highlight the factors determining the rental values of commercial properties in Lagos Island.

The research method adopted for this research is the secondary and primary sources of data and carried out by random sampling method.

It was recommended that office centres should be incorporated in development plans for regional economic development and that government   should endeavour to envisage full impact of their economic, fiscal and monetary policies on the various sectors of the economy before embarking on such policies.

In conclusion the fluctuation the value of naira  has effect on rental value of commercial properteis because it leads to high rental value as a result of high  cost of building materials and demand and supply as factors.

 





 

TABLE OF CONTENT

Contents                                                                                 pages

 

Project title page                                                                     i

Certification                                                                                      ii

Dedication                                                                              iii

Acknowledgement                                                                            iv

Table of contents                                                                              v

List of Tables                                                                                    ix

List of figures                                                                                    x

Abstract                                                                                            xi

 

CHAPTER ONE

 GENERAL INTRODUCTION                                                 1

1.1    Introduction                                                                           1

1.2    Statement of problems                                                          2

1.3    Aim and objectives                                                                 3

1.4    Research hypothesis                                                              4

1.5    Scope of study                                                                        5

1.6    Significance of study                                                              5

1.7    Limitation of the study                                                           6

1.8    Definition of terms                                                                 7

References                                                                    9

 

CHAPTER TWO

LITERATURE  REVIEW

2.1       Introduction                                                                           10

2.2       Historical background                                                          12

2.3       Relevant theories and model on the topic                            14

2.3.1  Concept of rent to land                                                          14

2.3.2  Rent theories                                                                          18

2.4       Factor affecting rental values                                                26

2.4.1  Demand factors                                                                     26

2.4.2  Supply factors                                                                        28

2.5    Commercial properties                                                          30

2.5.1  Classification of commercial properties                               31

2.5.2  Concept of goodwill                                                                35

2.5.3  Factors affecting locational decisions                                   36

2.6       Causes, effects and ways of minimizing fluctuation   41

2.6.1  Causes of inflation in Nigeria                                                42

2.6.2  Effects of inflation                                                                  44

2.6.3  Ways of minimizing inflation                                        46

2.6.4  Causes of deflation                                                                49

2.6.5  Effects of deflation                                                                  50

2.6.6  Ways  of minimizing deflation                                                51

2.7       Effect of fluctuation on rental value                                      51

2.8       Current – literature                                                               54

References                                                                    55

 

CHAPTER THREE

Research methodology and study area (case study)

3.0    Introduction                                                                           58

3.1       Restatement of research hypothesis                                     58

3.2       Sources of data                                                                      59

3.2.1  Primary source                                                                      59

3.2.2  Secondary source                                                                  60

3.3       Characteristics of the population of study.                          60

3.4       Sampling techniques                                                             60

3.4.1  Sampling design                                                           61

3.4.2  Sampling procedure                                                              61

3.4.3  Determination of sampling size                                             62

3.5       Questionnaire administration                                               62 

3.5.1  Questionnaire design                                                            62

3.5.2  Questionnaire distribution                                                   63

3.5.3  Collection of responses                                                         63

3.6       Techniques for data analysis                                                64

3.7       Limitations of the research methodology                             65

3.8       Study area/case study                                                          65

References.                                                                             68

 

CHAPTER FOUR

4.0    Data presentation and analysis                                            69

4.1       Introduction                                                                           69

4.2       Presentation and analysis of data based on

research objectives                                                                70

4.3       Analysis other relevant data                                        75

4.4       Presentation and analysis of data according  to

responses the research hypothesis                                      84

References

 

CHAPTER  FIVE

5.0       SUMMARY OF FINDINGS, RECOMMENDATION,

AND CONCLUSION FOR FURTHER STUDIES

5.1       Summary of findings                                                             93

5.2       Recommendations based on research findings                   94

5.3       Conclusion                                                                             95

5.4       Suggestion for further studies                                              96

References                                                                    97

Bibliography                                                                           98

Appendix






LIST OF TABLES

 

4.1       Questionnaire administered

4.2.1  Extent of the effect of fluctuation on rental value of commercial properties

4.2.2  Which of the following factors are the most determined factors of rental or capital value of property in this locality.

4.2.3  Why are some of residential properties in commercial centres been converted to commercial properties

4.2.4  How has the trend been?

4.3.1  Factors responsible for concentration of developers on commercial properties in LagosIsland.

4.3.2  How often the rental value of the properties change.

4.3.3  Which of the following commercial dominate in the area, most viable and attract more rent.

4.3.4  State the area of specialization of the firm.

4.3.5  Types of specialized properties

4.3.6  Status

4.3.7  Justification of rent paid on commercial property  in Lagos Island with any other commercial property in the state

4.3.8  Effect of fluctuation on trend  of rental value

4.4.1  Does fluctuation on the value of naira on rental value affect commercial properties

4.5       The annual trends in rental value of commercial properties in Lagos Island

4.5.1   Percentage rate of inflation

4.5.2 Exchange rate of Naira to Dollar






 

LIST OF FIGURE

2.1.   Bar chart for plot  development

2.2    Bar chart on yield capacities

2.3    Pattern of urban land values i.e. rental value

2.4    Graphical illustration of rent curves

4.1    Bar chart  on questionnaire administered

4.2.1 Bar char  on the extent of the effect of fluctuation on rental value of commercial properties

4.2.2 Bar chart  on the factors  are the most determined factors of rental or capital value of property in this locality.

4.2.3  Bar chart on the reason why residential properties in commercial centres been converted to commercial properties

4.3.1  Bar chart of the  developers of commercial properties in Lagos Island.

4.3.2  Bar chart on how the rental value of properties changes.

4.3.3  Bar chart on the commercial properties that dominate most  viable and attract more rent in the area.

4.3.4  Bar chart on the area of specialization of the firm

4.3.5  Bar chart on types of specialized properties

4.3.6  Bar chart on status

4.3.7  Bar chart on justification of rent pay in Lagos Island

4.3.8  Bar chart on effect of fluctuation on trend of rental value

4.4.1 Bar chart on how fluctuation on the value of naira on rental value affect commercial properties

 







 

CHAPTER ONE

 

GENERAL INTRODUCTION

1.1       INTRODUCTION

Lagos is a state that is notable among states on Nigeria as seen on in commercial activities.

The rental value of commercial properties resulting from differences in location has engaged attention of scholars for year. The need to determine the rental value inherent in commercial properties is very essential and cannot be over emphasized. The rental value of commercial properties has various mandatory factors which affect their increase this factors includes demand and supply, property’s physical state at present, location of the property, uses to which the property can be put.

Fluctuation can be defined as the rate of inflation and devaluation of money (naira). It is upward and downward movement of naira as a purchasing power on Nigeria to acquired commodity.

The fluctuation of naira can be tagged to increase demand of imported building material as a result to meet modern building  technology by the supplier/developers. Devaluation can only set in if supplier or developers always depend on the use of locally building material manufacture and it will enhance the value of naira.

The high inflation rate has further compounded the problem of huge capital normally needed for real estate developed as manifested in astronomical prices of building materials  and cost of labour.

Hence there is a great correlation between the fluctuation in the value of naira on rental value of commercial properties which need serious attention or point of consideration as the case may be.

 

1.2       STATEMENT OF PROBLEM

The economy of Nigeria over the years has been in a jeopardy which is evident on the rapid increase in price of goods and services in the country. The unstable nature of price value of goods and services which has always been on the increase is synonymous to the fluctuation in the value of naira.

Rental value is one of the categories of such commodities that is greatly affected by the instability or fluctuation that has always occurred in the value of naira.

Commercial properties tend to be so greatly affected by this development because it is ranges from place to place and it cover a great  proportion of the total physical development in Lagos Island.

 

The following pertinent questions about fluctuation in the value of naira on rental value are as follows:

(i)           Why is it that there is always an increasing fluctuation rate in the value of naira?

(ii)          Why does this fluctuation affects rental value and how does it affect the rental value?

(iii)        Of all types of properties why is it that it is commercial properties that is mostly affected?

 

1.3       AIM AND OBJECTIVES

The aim of this dissertation  is to assess the fluctuation in the  value of  naira as it effects the rental value of commercial properties in the study area.

 

The general objectives of this research work are to determine the effects of the fluctuation on the value of naira on rental value of commercial properties in Lagos State.

The specific objectives are:

i.             To examine the cause of fluctuation in the value of naira on rental value of commercial properties.

ii.           To examine the trends in commercial properties rental value.

iii.          To highlight the factors determining rental values of commercial properties.

iv.          Finally to proffer suggestions to the problems posed by inflation on rental values of commercial  properties in Lagos Island.

 

1.4       RESEARCH HYPOTHESIS

Ho:    There is no significant relationship between fluctuation in the value of naira and rental value of commercial property.

H1:-   There is a significant relationship between fluctuation in the value of naira and rental value of commercial property.

 

1.5       SCOPE OF STUDY

The scope of the study is to cover some selected commercial properties in the five local government areas of Lagos Metropolis namely:-

Lagos Island, Ikeja, Ikoyi, Oshodi and Agege

The neighborhoods in Lagos metropolis are classified according to national  population commission  as low density, medium density, and high density commercial neighborhoods, certain  areas were selected based on population, where questionnaire were distributed to collect  information. Rental values of commercial properties for a decades (1993-2003) were also gathered.

 

1.6   SIGNIFICANCE OF STUDY

This study is intended to examine the overwhelming effect of fluctuation in the value of naira on rental value of commercial properties and provide a provisional guide to private investors as to the type of property investment best suited for a particular location. It will also assist the various participants in the real estate investment sector to make decisions as to which area is badly affected and to be able to make futuristic decisions.

 

It will also serve as database for student and various participants in the sector for the present and future.

 

1.7   LIMITATION OF THE STUDY

The constraints encountered during the course of this research include:

-              The inadequacy of text books and written materials on the relevance of the topic and visitation of the case study had to be done several times, despites the fact that other courses and assignment demand time too.

-              The uncooperative attitude and dodging of question from the respondent and lack information from the residents of the commercial proprieties.

-              Inadequacy of proper records on rental values of commercial properties

 

 

 

1.7   DEFINITION OF TERMS

1.7.1 Rent

Olusegun (2000) defined rent as the annual or periodic payment made by a tenant or user of a property to the landlord in consideration of the rights in land and landed properties granted to the tenant under a lease or tenancy agreement. It is a major condition necessary for the solidification of a lease or tenancy agreement. It can be collected annually, quarterly, Bi-annually, monthly or weekly based on the agreement.

 

1.7.2   RENTAL- VALUE

Olusegun (2000) defined rental value as the amount of money which a willing and able tenant can pay for his occupation of a particular property. From another point of view, it implies the rental price at which a property would be let in an open market if the property is duly advertised.

 

1.7.3   PROPERTY

Thorncroft (1965) defined property as the exclusive right of ownership given, that anything which belongs to a person giving the exclusive right of enjoyment e.g. land and building. It is the exclusive right possession, enjoyment and disposal or right of control an individual has over a thing. 

 

1.7.4   PROPERTY MARKET

Olusegun (2000) defined property market as the medium through which a  cluster or bundle of rights in land and landed properties are  exchanged between buyers and sellers. It can also be said to be a type of an investment in which capital sum in given up in realization of a return to be received over a period of time.

 

1.7.5   FLUCTUATION

Andy (2001) defined fluctuation as the rate of inflation and devaluation of money (naira). It is upward and downward movement of naira as a purchasing to acquire commodity

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