FACTORS INFLUENCING HOUSING PURCHASE DECISION IN SOME SELECTED PROPERTIES IN CBD ABUJA

FACTORS INFLUENCING HOUSING PURCHASE DECISION IN SOME SELECTED PROPERTIES IN CBD ABUJA

ABSTRACT

This study examined factors influencing housing purchase decision in some selected properties in CBD Abuja. Specifically the study seek to ascertain the factors responsible for housing purchase decision in the study area, to determine whether prospective house buyer or owners have access to primary mortgage institution, to find out if lending policies of mortgage institutions affect  housing purchase decision, to find out if high interest rates charge by mortgage institutions affect housing purchasing decision in the study area and to find out if availability of funds affect housing purchase decision in the study area. The study employed the use of self-administered questionnaires to obtain relevant data. The study revealed that the housing of preferences of civil servants in the study was ranked  the hierarchical order as follows, Duplex, Condominium, Flat house, Detached house,  Bungalow, Semi-detached, Terrace house, Tenement house, Row house while the factors influencing homeownership were ranked in the order below, Costs of building materials, Land acquisition, Personal priority, Salary, Marital status, Loan facilities, Land security, lending rate, parental home ownership, Gender, Age, Education. This work recommends that in other to improve and increase homeowners amongst civil servants mortgage finance, government should implement a policy that will make cost of building materials  affordable (rebate for importers of building materials), ensure that civil servants salaries are upwardly reviewed as at when and paid promptly, should ensure the mortgage institutions in the country are citizens-friendly, efficient and effective, government should also implement a policy that will make land affordable and secured, and provision of housing loans at a  relatively low lending rate should be implemented. These will really help increase number of homeowners the study area.

CHAPTER ONE

INTRODUCTION

1.1       Background to the study

A house is an essential need, which provides peace and comfortable space for a family. As a developing nation, Malaysia is involved with various emerging innovations, particularly in the residual sector. Various new forms and feasible destination are involved in these innovations. Despite the diversity in housing choice in terms of size, category, location, design, cost, and materials (Abdullah et. al., 2012), it remains a challenging process. Housing choice is also associated with some elements influencing the decision-making for house purchase, which varies for each individual.

In the housing market, housing choice among buyers is essential due to its function in predicting housing demand, which offers indirect assistance for the government to stabilise housing policies and further promote house ownership (Abdullah et al., 2012). Essentially, the comprehension of housing preference is crucial for the buyers’ decision-making, particularly first-time buyers (Khan et al., 2017). A study by Reid (2013) recorded various elements influencing housing preferences, namely the relative price of ownership over rent, fortune, salary, credit constraints, destination, household features, house category, cost, and distance from service and product facilities, accessibility, and open space. Other elements are convenient to access to public transport, proximity to school and commercial space (Fierro et al 2009). Accordingly, Zyed et al (2016) recorded other elements influencing housing affordability, namely house cost, household salary, and housing selection. Meanwhile, Khan et al (2017) determined other elements, including security, construction standard, and design features. Hwa (2017) recently found that the developer’s reputation is another aspect taken into account in property purchase in Nigeria.

According to Fetter (2013), factors influencing housing purchase decision are many and broad, but the major influencing factors are; Priority of needs, access to fund, Agboola (1987) in his work recognised finance as part of home development problems. Availability of land, affordability of land, security of tenure etc. Other factors have experienced a steady increase in their impact on home ownership. In a tight money market, homeownership is the first area to suffer, since neither the builder nor the consumer can readily obtain finance for home development.

Accessibility to finance plays an important role in home ownership effort. In Nigeria today, finance is the fulcrum around which housing provision revolves, and is the most crucial element in housing investment. The availability of finance determines access to other key inputs of land, labour, materials and infrastructure (Okoroafor 2007). The issue of finance is pivotal to the realization of any housing scheme. The problem arises from poor fund mobilization and current pervasive level of poverty, which inhibits savings and investment; the undeveloped nature of Nigeria’s housing finance system; absence of appropriate legal framework for efficient operation of housing finance system and general lack of awareness on the operation and benefits of housing finance system through capital markets (Nubi, 2008; Abiodun, 1999).

Essentially, purchase decision on housing property is a conclusion after consideration of buying a house or real estate. The decision can be considered as a resolution after several research activities or processes. Several changes take place in the lifestyle of the Malaysian population, which affect the determinant of housing property purchase decision and its impact on housing demand in Malaysia. In offering affordability and quality in housing, the private developers and the government should identify the primary elements leading to the house purchase, ensuring the successful operation of projects, and satisfying the homeowners’ long-term goals for living or investment. Moreover, housing property purchase decision may refer to the purchase of shelter, while the house fulfils the buyers’ needs and desires (Wang, 2013, as cited in Mariadas et al., 2019). Homebuyers would require a comprehension regarding the aim of housing property purchase and determine the associated elements before reaching the purchase decision (Thaker and Sakaran, 2016). An improved understanding of individuals’ selection of residential property is crucial (Ibem et al., 2015). This is similar to the importance of understanding the factors of buyers’ understanding of the residence adequacy and satisfaction in the circumstance of properties (Mariadas, 2019). Therefore, this research is set to examine the factors influencing housing purchase decision in some selected properties in CBD Abuja.

1.2       Statement of the Problem

One of the major problems of housing purchase or ownership has been the inadequate supply of long term funds which represents the major in issues of providing mortgages. Thus, the system has relied on compulsory savings into National Housing Trust Fund (NTITF) scheme. As a result of this, effort has been made by the regulatory authorities in Nigeria to increase the supply of long-term funds for onward lending to prospective homeowners A few of these effort include the recent recapitalization of Primary Mortgage Institutions in Nigeria, the pension and financial sector reforms and the recently promoted Mortgage Backed securities on the future of investment return in the mortgage industry. According to Agbakoba (2015), Housing purchase is a desire of an average Nigerian, and most people in Nigeria still find home ownership as a major, it is interesting to note that all governments in Nigeria since Independence have always highlighted homeownership for citizens as a major priority. Agbakoba (2015) said, “There is a shortage of housing for low – income earners and constantly growing housing demands (due to increase in population) that are not met.” Unfortunately, banks are reluctant to provide mortgage facilities to low – income earners. It is against this background that this study seeks to examine the factors influencing housing purchase decision in some selected properties in CBD Abuja.

1.3       Aim and Objectives

The aim of the study is to examine the factors influencing housing purchase decision in some selected housing properties in CBD Abuja.

The specific objectives are to:

1. To ascertain the factors responsible for housing purchase decision in the study area
2. To determine whether prospective house buyer or owners have access to primary mortgage institution
3. To find out if lending policies of mortgage institutions affect  housing purchase decision
4. To find out if high interest rates charge by mortgage institutions affect housing purchasing decision in the study area
5. To find out if availability of funds affect housing purchase decision in the study area.

1.4       Research Questions

The following are the research questions

1. What  are the factors responsible for housing purchase decision in the study area?
2. Does prospective house buyer or owners have access to primary mortgage institution?
3. Does the lending policies of mortgage institutions affect  housing purchase decision?
4. Does high interest rates charge by mortgage institutions affect housing purchasing decision in the study area
5. Does availability of funds affect housing purchase decision in the study area.

1.5       Significance of the Study

To the Government of Nigeria: The study will lead to the understanding of the factors that influence home ownership in urban centers in the country and therefore assist in crafting of policies tailored towards making home owner ship affordable to its citizens.

To the management of the Organizations: The study will be beneficial to them as it will assist in environmental scanning which involves analysis of both internal and external environmental factors which includes; strengths, weaknesses ,opportunities and threats.

To the consumers Lenders: The study will enable them to have various options available in the market as it will enable them be aware of the opportunities a available in the housing market.

To researchers: The study will lead to establishment and examination of the root cause of the problem under investigation, its effects and the necessary recommendations from the research findings while addressing problems of mortgage loans.

It will also be used as a basis of future studies, act as authority and reference. They will have material for future research topics.

To other stakeholders: The study will be useful in business decision making with the companies involved. It will enable other stake holders to deliberate and make important decisions on their dealing with the organizations involved.

1.6       Scope and Limitation of the Study

The scope of this study was limited to the factors influencing housing purchase decision in some selected properties in CBD Abuja. The study was mainly focusing on source of funds such as mortgage facilities offered by mortgage institution and the influence they had in housing purchase decision.

Limitations

1. Some respondents were likely to avoid questions put to them and this may result in wrong conclusions or recommendations made.
2. Unreturned questionnaires could lead to inadequate data from respondents. This may affect the study by not giving the general view of lenders. However a representative sample will be selected to ensure that the findings of research are not jeopardized.
3. Due to high confidentiality of some information, it was likely that access to some information which was of great importance to this study might be denied.

1.7       Operational Definition of Terms

Home: According to Cambridge English Dictionary home is defined as the house, apartment, etc. where you live, especially with your family: 2. a house, apartment, etc. when it is considered as property that you can buy or sell:

Ownership: Business English Dictionary define ownership as the ultimate and exclusive right conferred by a lawful claim or title, and subject to certain restrictions to enjoy, occupy, possess, rent, sell, use, give away, or even destroy an item of property.
Mortgage: Cambridge English Dictionary define mortgage as an agreement that allows you to borrow money from a bank or similar organization, especially in order to buy a house, or the amount of money itself:

Finance: Merriam Webster define finance as money or other liquid resources of a government, business, group, or individual.

Civil servant: Collins English dictionary define civil servants as a person who works in the Civil Service of a country or state.

   1.8       Background of the Study Area

It was in 1976 that Federal Military Government led by Late General Murtala Mohammed enacted Federal Capital Territory Act (FCT) established Abuja after it has been chosen to be the administrative capital of Nigeria and with solely administrative functions. This was after the failure of Lagos due to the problems of inadequate land space for future expansion, terrible traffic congestion, poor drainage, acute housing shortage and associated costs, unbearable ethnic influence etc. The planned period for the transfer was to be completed in 1986. However, it was on 12^th December, 1991, that the final movement of Federal capital to Abuja became a reality. Abuja is located in the geographical centre of Nigeria (Figure 1.1) and lying between latitudes 6o 45’ and longitudes 7o 39’ north of the equator. The land of approximately 8,000 square kilometres was carved out from the then neighbouring states of Kwara, Niger and Plateau to serve as the FCT and the Federal Capital City (FCC) to constitutes about 250 square metres. From its designed capacity the FCC will contain 3.2 million people when the development of the city is completed, however, the Abuja population has exploded to 6 million with less than 50% of development attained. The government vested all the land in FCT in the Federal Government of Nigeria. The government also created Federal Capital Development Authority (FCDA), as its agency responsible for the spatial planning and development of the FCT.