AN ASSESSMENT OF RESIDENTIAL PROPERTY VALUE DETERMINANTS - A CASE STUDY OF IKEJA, NIGERIA

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By Olumide T. Agunbiade

 INTRODUCTION AND BACKGROUND

1.1 INTRODUCTION

No other industry depends on accurate and timely information for decision making and survival as much as the Real Estate Industry. The Industry according to recent study and research has an estimated 5 million participants in Nigeria.

Nigeria has a large real estate market that is untapped due to limited circulation of information about property characteristics 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.

1.2          BACKGROUND TO THE STUDY

For decades, real estate property was generally seen as 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 constitute a significant index to man’s wealth. As economic activities have achieved more sophistication over time, real estate has continued to play a central role in their development.

The dictionary defined Property as anything, tangible or intangible whereby legal relationships exist between persons and the State enforces a possessory interest or legal title in that thing. Recently Igbinosa (2011) opines that property is used to describe particular concentration of power over things and resources. Narang (2007), gave a more detailed definition of property as the ability an individual or group of persons have to express power or authority over a substance, thing or substance based on its relationship with the substance and depending on the nature of the property, an owner of property has the right to consume, sell, rent, mortgage, transfer, exchange or destroy it, or to exclude others from doing these things.

Property serve as generating revenue to the owner. This assertion was supported by Oni (2009), when examining the benefits of commercial property and was of the opinion that commercial property generates streams of income to the owner and also to the government inform of tax. Egbenta (2009), looked at the benefit of property from the social perspective and concluded thatlanded property helps to define the social relations of man in his community; this can be seen in most sub-Sahara African countries, where land defines the social, economic and political relations of man in his society, especially in urban areas. Property also serves as resources this view was also shared by Fabiyi (2006), when they perceive landed property as an indispensable resource, the abundance or scarcity of which has profound effects on man and development.

Value is often seen as the worth of a property. Most people often ascribe the same meaning to value, price and cost. Kuye (2008), assisted in differentiating between them, according to him value represents the actual worth of whatever it is that you are buying, such as goods or services, price is the amount of money you pay for goods and services while cost is the amount that has to be paid or spent to buy or obtain something.

International Valuation Standard and Committee (IVSC) (2007), defined value as the estimated amount for which an asset should exchange on the date of appraisal between a willing buyer and a willing seller in an arm’s length transaction after proper marketing wherein the parties had each acted knowledgeably, prudently and without compulsion

However different authors have different opinion about the concept of value but there is something unique in their opinion which is “value represents the worth of something and it’s usually subjective in nature”. According to Igbinosa (2011), different property would command different values and would also have different factors affecting or influencing their values.

A number of factors affect residential property values in Nigeria. These include location, demand and supply, accessibility, institutional and economic factor. The market value may mean the amount of money which the property will command in exchange. Yet, value is not the same as price or cost. 

Besides, there are differences in values of similar properties situated in different locations. Values of properties in good location having serviced facilities are expected to be higher than those in the areas that are good but lack adequate infrastructural facilities and services.

Regardless of these advantages, real estate practitioner, financials and investors in commercial properties are faced with dearth of data on what level of rental income a development project could reasonably be expected to realize in a transaction involving willing and able parties.

The overall impact of risks and uncertainty in the property market calls for tool to predict future trend in commercial property market with some measure of accuracy. 

This is to ensure that income which a given commercial property generates in the future be sufficient to recoup the capital outlay and be sustained subsequently.

The importance of location and other property features to the value of properties would therefore be the focus of this study through an assessment of prime residential area of Lagos state.

Also, this study will identify various property characteristics that have relatively strong impact on market values (prices) and to an extent influence the sales and purchase decisions of sellers, buyers and investors in Nigeria.

 The value for a residential, commercial industrial, agricultural special property would differ from each other as well as the factors affecting them. Against this background the research would determine the factors influencing residential property values.

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