AN ANALYSIS OF THE VARIATIONS IN THE RENTAL VALUE OF RESIDENTIAL PROPERTIES IN NASARAWA TOWN
ABSTRACT
This study analyzes the variation in the rental value of residential properties in Nasarawa town with the following specific objectives of the study; identify the types of residential properties prevalent in Nasarawa, examine the factors affecting change in rental value of residential property in the study area, to assess trends in rental value of residential property in the study area and determine the rental value variation from neighborhood to neighborhood. The researcher reviews relevant literatures on the subject matter and adopted the use of questionnaires and personal interview to gather data from the research population. Also observation and surveys are employed. The findings of the study shows that there is variation in rental value of residential properties from one location to another within Nasarawa town, depending on factors such as facilities available in and around the properties such as electricity, portable water, WC, tiles etc. the study recommend that the government and property owners should provided needed facilities to fair and slight variation in property value.
CHAPTER ONE
1.0 INTRODUCTION
1.1 BACKGROUND OF STUDY
Housing or residential properties has long been perceived by the general public as a form of basic necessity and often represents the one single largest investment in their personal investment portfolio. According to Tracy (1999) residential properties represent roughly two-thirds of the household’s overall assets. An individual can satisfy the need for housing or residential property by either occupying his own (owner’s occupier) property or renting another person’s property. In our traditional society, the need for shelter is mainly met through the first alternative that is owner occupation. With the emergency of urban centers, the situation has changed. Many people are no longer able to own property because of the difficulty in the acquisition of land and the high cost of building construction (Agbola & Kassim, 2017). Therefore, they are left with the alternative of renting other people’s properties in order to satisfy their need for shelter. Consequently two classes of urban resident have emerged, the landlord and the tenant under this arrangement the tenant pays to the landlord a certain amount of money in consideration for his use of the landlord’s house.
According to Boon and Higgins (2017), rental value is a key parameter for measuring real property performance. It is also a major cost for tenants and an important source of income for the landlord. Key property market participants such as investors and developers often use rental value as an indicator to appraise the viability of their real estate development and investment schemes. On this basis, understanding the nature and variation in rental value of residential property provides a better comprehension of the dynamics of the residential property market. Also, rental growth indices are often incorporated into discounted cash flow analysis for the appraisal of real property investments (Boon and Higgins, 2017).
Rural – urban migration and rapid growth in population have led to higher level of urbanization in Nigeria cities which have resulted to high demand for the existing limited supply of residential property consequent rent for such properties increased considerably. This trend has continued with the effect that “the average worker is paying 30% to 40% of his salary as rent” (Oshadiya, 2005). Thus the increase in rents on the properties has led to the variation of rent on properties. Thus, professionals in the real estate industry in Nigeria require better knowledge of residential property rental dynamics as well as the key factors that influence changes in residential property rents in Nasarawa and the country at large. It is against this background that this study seeks to analyze the variation of the rental value of residential properties in Nasarawa town.
1.2 STATEMENT OF RESEARCH PROBLEM
Housing problems in urban centre’s have often been viewed in terms of quantitative deficiency and qualitative inadequacy with little or no attention to the problems of increasing rent. As there are many urban residents struggling to get accommodation, most of those that already have a roof over their heads in rented accommodation, especially the majority low income urbanities are not comfortable because of sprawling rent increases. The problem of variation in rental value of residential property reached a peak during the crisis stage in the early 1970s which led the then Federal Military Government to set up a Rent Panel to review, among other things, the level structure of rents in urban centers. Today, the rent situation has not improved rather it has been further worsened by the equally sprawling inflation which has tremendously shot up the cost of building materials. The purpose of this study is, therefore, to analyze the variation in the rental value of residential properties in Nasarawa town.
1.3 AIM AND OBJECTIVES OF THE STUDY
The aim of this research is to analyze the variation in the rental value of residential properties in Nasarawa town.
The specific objectives of the study are:
i. To identify the types of residential properties prevalent in Nasarawa.
ii. To examine the factors affecting variation in rental values of residential property in the study area
iii. To assess rent passing on residential properties in the study area
iv. To determine the rental value variation from neighborhood to neighborhood;
1.4 RESEARCH QUESTIONS
The following research shall guide the researcher to achieve the aim and objectives of this study:
i. What are the types of residential properties prevalent in Nasarawa?
ii. What are the factors affecting variation in rental value of residential properties in the study area?
iii. What is the rent passing on residential properties in the study area
iv. What is the rental value variation from neighborhood to neighborhood
1.5 SIGNIFICANCE OF THE STUDY
The finding of this study will be of benefit to the following groups;
Firstly, tenants who are charged rents based on different reasons, especially when the properties are of the same nature (physically). This will again enable the investors not only to understand how occupier thinks, but also why and the things they consider before acquiring properties for certain uses.
Secondly, the generality of the public can now understand the reason why the rents being commanded by these properties have to differ and changes over the years. Lastly, this research work will help to determine the factors influencing residential properties which are an essential pre-requisite to successful development as well as stimulating interest in the students to carryout out further research on the topic.
1.6 SCOPE AND LIMITATIONS OF THE STUDY
The study is analyze the variation in the rental value of residential properties in Nasarawa town. The scope of this study will be limited to a period of five years (2013 to 2018) and it is restricted to residential properties comprising blocks of flat and tenements in Nasarawa town.
Limitation
Expectedly, this work met with some hindrances during the stage of data collection. The issue of rent passing on a property (residential or commercial) is usually regarded as classified information, which is not easily disclosed to people particularly researchers. This was largely suspected to be the reason why some Estate surveyors, property owners, tenants, Estate firms, property companies and even Estate agents who were approached through oral interviews, discussions and visitations found it rather difficult to reveal essential information despite every explanation that the exercise is strictly for academic purposes, a good number of them, still nursed the fear that it may be for property rating and taxation purposes.
There was also the problem of logistics occasioned by the society. The researcher worked with a very light budget throughout the period of study as the frequent and repeated visits to relevant persons and offices entailed quite some money. Moreover, also recall that some of the interview respondents were not co-operative as they kept on playing to the gallery as a means of avoiding supplying the required information. On a general note however, the researcher ensured that these bottle – necks never affected the findings of this study since the success far outweighed the hindrances as enumerated.
1.7 OPERATIONAL DEFINITION OF TERMS
RENT: The universal dictionary of the English language (2016) defined rent as the regular payment made for the use of land or buildings that belongs to someone else. The Economist defined rent as “the revenue from land resources that is equal to the value of its marginal services rendered in a productive process” (Richfield, 2011).
LAND: Section 205 of the property act of 1925 defined land to include land of any tenure and mines and minerals wealth or not held apart from the surface and building or part of the building, and other corporeal hereditament, benefit right or privileges in or derived from land.
RESIDENTIAL PROPERTY: This consists of properties that provide housing accommodation. In this category are buildings of cluster of apartment such as flats, duplexes, bungalows, tenement buildings etc. (Ahmed, Dogara and Akeh, 2012)
SLUM: Slum according to Simon (2010) defines slums as a group of building or an area characterized by overcrowding, deterioration, un-sanity or absence of amenities or facilities such as portable water, drainage system, schools, health facilities, recreational ground, access road e.t.c.
PROPERTY: Property in a technical legal term means “a unit or object whether tangible or intangible upon which interest is created and over which control or right of ownership is exercised by the owner of interest.
LANDED PROPERTY: Landed property or landed estate is a property that generates income for the owner without the owner having to do the actual work of the estate.
RENTAL VALUE: Is the maximum amount which a property will let in the open market at any giving time.
REAL ESTATE: Is a legal concept encompassing all the interests, right and benefit related to ownership. Properties consist of the right of ownership which entitle the owner to a specific interest or interest in what is a physical entity and its ownership Olusegun (2003).
1.8 THE STUDY AREA
HISTORY
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.
The founding of Nasarawa Emirate in 1835 AD was the consequence of palace tussle that arose in Keffi between Umani Makama Dogo then Madaki of Keffi and Jibrilu, son of Abdu Zanga (first Emir of Keffi).
On the sick bed of Abdu Zanga, He gathered his brothers and sons and told them to appoint Umaru Makama Dogo as the Emir of Keffi which was never realized after the death of Zanga due to the betrayal to one Albarka. However, Makama Dogo was advised to move Westward of Keffi where the Kwato (Igbira) resides, fought then and established his own kingdom but he kicked against the idea and moved Yankardi, where he camped about ten kilometer South of Keffi.
Makama left his sons Ahmadu Manman Galadima and Manman Sani in Keffi as a flash back. He later left Yankardi where he arrived at a place occupied by Bassa speaking people called TAMMAH, met Bagobiri known as Kasimau, who assisted him in the establishment of a kingdom called Nasarawa (meaning victorious). Makama Dogo fought many wars in the course of his Islamization, fought Afo speaking people, conquered Ubbe, Usheni, Agwadama, Itta and Gwaffa.
Makama Dogo also conquered Panda due to some misunderstanding between him and Ohimege (the ruler of Panda). Makama Dogo fought the people of Toto (Igbira people) because of the combination of Islam and traditional way of worship by the people. After fighting other kingdoms like Dogo, Agaza and Udeni, Umaru told Madaki Ahmadu his eldest son to continue leadership after his death and should please be buried in Nasarawa town.
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,
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, must 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.