FACTORS INFLUENCING CAPITAL VALUE OF RESIDENTIAL PROPERTY IN WUSE 2 ABUJA NIGERIA
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 influencing capital value of residential properties in Wuse II Abuja, Nigeria.
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. Wuse II have attained urban status and a very fertile ground for investors in residential real estate development within 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 Wuse and Abuja at large that very soon capital value 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 examine the factors influencing capital values of residential properties in Wuse II Abuja, Nigeria.
1.3 Aim and Objectives
The aim of this research is to evaluate the factors influencing capital values in residential property in Wuse II Abuja Nigeria. To achieve this aim, the specific objectives shall be pursued:
- Identify the types of residential properties in Wuse II Abja
- To ascertain the trends in capital value of residential properties in Wuse II.
- To ascertain the various factors that influence capital values of residential properties in the study area
- To evaluate the effects of such factors on capital value of residential properties in the study area.
1.4 Research Questions
- What are the predominant types of residential properties in Wuse II?
- What are the trends in Capital value of residential properties in Wuse II?
- What are the factors that influence capital value of residential properties in the study area?
- What are the effects of such factors on capital 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 influencing capital values in residential property.
The research will be of great significant to the government especially the Wuse II and Abuja in ascertaining the right tax and rates to be collected on residential properties founds within the area having known the various factors determining the capital 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 capital values in residential properties in Wuse II so as to bring the research work to a manageable size and to avoid complication.
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)
Capital Value: Capital value is the price that would have been paid for a given property or asset if they had been purchased at the time of their evaluation.
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).