AN ASSESSMENT OF THE FACTORS INFLUENCING RENTAL VALUE OF RESIDENTIAL PROPERTIES IN NASARAWA TOWN
(A CASE STUDY OF TAMMAH)
ABSTRACT
This project assess the factors influencing rental value of residential properties in Nasarawa town with particular reference to Tammah, the study specifically seek to identify the types of residential properties in Tammah, ascertain the trends in rental value of residential properties, ascertain the various factors that influence rental values of residential properties and evaluate the effects of such factors on rental value of residential properties in the study area. The research method used was survey. The sampling techniques adopted for this study is the random sampling techniques, the techniques give every member of the population the opportunity to be selected without any form of preferential treatment. A total of one hundred (100) copies of questionnaires were administered, and out of these, 85 copies of the questionnaires were correctly filled and returned. The researcher make use of statistical tools such as tables, percentage and descriptive methods to presents and analyzed the data gathered from the field survey which was considered appropriate for the research. The findings of the study shows that the characteristics of the residential properties such as available facilities in the properties, urban infrastructure, locational factors among others affect the major factors affecting rental value of residential properties in the study area. Finally the study recommend that to sustain residential property market and ensure higher rental value in the study area, it is suggested that prospective property developers should take cognizance of locational, structural and neighbourhood factors that significantly affect property value in the study area as this would help the marketability and viability of the investment.
Key Words: Rental Value, Residential Properties
CHAPTER ONE
INTRODUCTION
1.1 Background of the Study
Property is a multi-dimensional product and the number and nature of factors that influence its value are equally of different kinds. Property and land values tend to increase in areas with expanding transportation networks, and increase less rapidly in areas without such improvements. Rapid and continued rise in housing and land prices are expected in cities with transportation improvements and rapid economic and population growth (Goldberg, 2017).
Residential properties have continued to attract the investment interest of real estate developers. This is because of the increasing demand for residential properties in the urban centres (Olujimi and Bello, 2009); and because of the increase in rent (value), which is usually attached to the property (Oduwaye, 2017). Several factors exist that determine value of residential real properties. According to Britton (2019), determinants of individual property value include location, time, property interest, state of repair, accommodation details and services/facilities. These factors affect properties thereby causing either “appreciation” or “depreciation” in its values. Adebayo (2016) affirmed that infrastructures as one of the factors can cause property value to appreciate and depreciation may occur in property values due to infrastructural degradation. Nubi (2012) describes infrastructure as the aggregate of all facilities that allow a city to function effectively. They include housing, electricity, pipe borne water, drainage, waste disposal, roads and sewage among others. The importance of infrastructural facilities in a residential property and indeed human life cannot be overemphasized.
According to Babarinde (2018), the efficiency of any form of human activity system largely depends on the provision of adequate infrastructural facilities. Studies have shown that the level of availability of infrastructure in most developing countries is drastically low.
The value of access is capitalized into the land value and access is measured through market participants’ willingness to pay. Essentially, this view suggests that accessibility measures may be inferred from land prices. The relationship among accessibility, property values and land use patterns has been the pre-occupation of earliest theorists with indication that travel costs were traded off against property rents and population densities from Central Business District (CBD) to suburbs of a mono-centric city (Oni, 2009).
Quality of the environment is also another factor that affects the rental values in residential property. Residential property value does not only depend on the physical characteristics of a building but also the environment that surrounds the building. Developments of various transportation modes have become pivotal to physical and economic developments. Access to major roads provides relative advantages to residential users (Rosen, 2014).
Modern business, industries, trades and general activities depend on transport and transport infrastructures, with movement of goods and services from place to place becoming vital and inseparable aspects of global and urban economic survival. Bello, M.O and Bello V.A (2007) stated that the factors affecting property values are generally classified into external and internal factors. This study therefore evaluate the factors determining rental values in residential properties in Keffi town.
1.2 Statement of Problem
According to Egbenta (2012), housing is one of the basic needs of life together with food and clothing. When demand for it increases in an area, rental values in such areas are bound to increase just like every other economic need. Nasarawa have attained urban status and a very fertile ground for investors in residential real estate development with the establishment of Federal Polytechnic Nasarawa and its proximity to Abuja the Federal Capital Territory, the city have been facing tremendous influx of people which poses serious stress on the existing residential properties. These have cause an increase in the rental values of residential properties over the years. Demand had by far outstripped supply of residential accommodation units and this had continued to impact positively on rents of different types of residential properties. The market failures had pushed market rents of residential properties up to an alarming degree. Consequently, there have been perceived fears among users and operators of properties in Nasarawa town that very soon rents of housing accommodation will rise above the affordability level of the people, this fear was founded on the fact that there was demand pressure on residential properties. It is on these bases that this research seeks to evaluate the factors influencing rental values of residential properties in Nasarawa town.
1.3 Aim and Objectives
The aim of this research is to evaluate the factors influencing rental values in residential property in Nasarawa town. To achieve this aim, the specific objectives shall be pursued:
- Identify the types of residential properties in Tammah
- To ascertain the trends in rental value of residential properties in Nasarawa.
- To ascertain the various factors that influence rental values of residential properties in the study area
- To evaluate the effects of such factors on rental value of residential properties in the study area.
1.4 Research Questions
- What are the predominant types of residential properties in Tammah?
- What are the trends in rental value of residential properties in Nasarawa?
- What are the factors that influence rental value of residential properties in the study area?
- What are the effects of such factors on rental values of residential properties in the study area?
1.5 Significance of Research
This research work will tend to enlighten the prospective developers and investors in the study area in view of the various factors influence in rental values in residential property.
The research will be of great significant to the government especially the Nasarawa Local Government in ascertaining the right tax and rates to be collected on residential properties founds within the area having known the various factors determining the rental values of such properties.
The research will also serve as a resource material to other researchers who are interested in making further research in this domain as the research contributes to the wealth of knowledge.
1.6 Scope and Limitation of the Study
The scope of the study shall be restricted to evaluating the factors influencing rental values in residential properties in Nasarawa town so as to bring the research work to a manageable size and to avoid complication. The scope of the study will be further limited to Tammah and Shagari Road.
Nevertheless, genuine efforts were made to ensure that a thorough work was carried out based on the observation and data obtained from different sources. Hence, all the data collected and presented on which all references and conclusion are made, were made as accurate as possible.
1.7 Definition of Term
Property: This is the embodiment of tangible ownership right or bundles of right in real estate. It could also be described as a concept of right which can be held separately (Babatunde, 2013)
Rental Value: This is the worth or value of property in an open market. It is also the value arising out of the lease or renting out of a property on a periodic basis usually yearly.
Residential Property: it is a building that is used or suitable for dwelling purpose. They are dwelling house such as bungalows, duplex, detached houses, semi-detached houses, etc.
Value: This is the monetary worth of a thing. It is expressed as the value of a goods or services measured by the amount of other goods and services for which it will exchange. It is a determination or quality of an object, which involves any sort of appreciation or interests. Such appreciation involves feeling and ultimate desire or tendencies. Value is basically the worth of a thing. (Olayonwa 2016).
1.8 Area of the Study
Nasarawa Emirate in Nasarawa State is located in the Central region of Nigeria. It is flanked by Keffi and the Federal Capital to the North. To the South, it is bounded by Benue River and to the west; it bordered the present Gadabuka and Toto Local government area which are of course, part of the Emirate. To the East, it is bordered by Doma, Lafia and Keana Local Government Areas all of Nasarawa State.
Physical Characteristics: The major things considered under physical characteristics of Nasarawa are, geographical location, temperature, rainfall, geology, wind, vegetation, humidity, soil.
Temperature: The temperatures are generally high during the day, particularly between the months of March and April. The main monthly temperatures in the state range between 200C and 340C with the hottest months being March/April and the coolest months being December/January.
Rainfall: The study area experience dry season without or little’s rainfall from November to March of about 95mm, which is wet season is from April to October of about 1.30mm,
Geology: From the Jos Plateau, this comprises of basement complex metamorphic rocks, granite and basalt of two or more ages. The basement complex is covered by shadow soil.
Wind: Nasarawa local government is determined by the seasonal movement on inter-tropical convergence zone [ITCZ], which represents the moving frontier between the moist Atlantic air from the south and the dry air from the north. In the dry season from November till March the north east wind are dominant. For the remaining of the year, the south-western winds are prevailing. Generally, the wind velocity is relatively low.
Vegetation: Nasarawa is situated in the Benue valley between the Benue river and Jos Plateau. This area lies within the part of southern guinea savannah. The vegetation of Nasarawa has, to a large extent resulted from extensive agricultural use of the land, the predominant vegetation type is partly savannah which is characterized by a discontinuous canopy, shrubs and grasses many areas are affected by man through bush burning during the dry season. Among the common trees are oil bean trees, locust bean free and isoberline trees.
Relative Humidity: The relative humidity is the measurement of deepness of the atmosphere which varies from place to place and different time of the day. The level of humidity in Nasarawa state in January is quite less that 40% which rises as from February to July to about 88%. By April when the steady rain commences it will be about 75% by August when the inter-tropical discontinuity is at it northern part, most position of the entire state will experience tropical marine wind and continues till December.
Soil: The major soil units of Nasarawa belong to the category of oxisols or tropical ferruginous soils. The soils are derived mainly from the basement complex and old sedimentary rocks. Lateritic crust occurs in extensive areas on the plains while hydro orphic soils (limbic incept sols) occur along the flood plains of major rivers (Nyangba, 1995).
Socio-Economic Characteristics: Nasarawa main economic activity is agriculture; cash crop, such as yam, cassava and egusi (melon). Production of minerals such as salt is also another main economic activity of people in the state; Nasarawa produces a large proportion of the salt consumed in the country.
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