INFLUENCE OF ENVIRONMENTAL EXTERNALITIES ON VALUE OF RESIDENTIAL PROPERTIES IN NASARAWA
ABSTRACT
The study examined the influence of environmental externalities on value of residential properties in Nasarawa town. To accomplish the above aim, the study identifies the types of environmental externalities in Nasarawa town; assess the current condition of residential properties and environmental externalities, evaluate the locational characteristics of the various residential areas that affect rental values of residential properties create profile a of annual rental values of residential properties relative to environmental externalities within the neighbourhood and evaluate the impact of environmental externalities on values of residential properties. The researcher makes use of the survey design which enables the researcher to take close study of the research population and obtain all the relevant information needed from respondents through the use of questionnaire, interview, and personal observation. Statistical tools such as tables, percentage and descriptive methods were used to presents and analyzed the data. The study found that environmental externalities such as neighborhood security, road condition whether tarred or untarred, availability and condition of drainage system, influences, residents habitability. The study also discovered that bad environmental externalities depresses value of residential properties in the study areas. Based on these it is recommended that residents should be encourage to promote the development of positive externalities within their residential environment with minimal governmental support.
CHAPTER ONE
1.0 INTRODUCTION
1.1 Background of the Study
Increased environmental awareness in the recent years has increased the demand for specific housing preferences, such as good accessibility and close proximity to green areas, water, and other physical attractions. Such features offer a variety of amenities in densely populated residential areas, including recreation, aesthetic attraction and access to clean air, creating a price premium on housing prices which is often omitted or underestimated by housing agencies. Urbanization and increased environmental awareness of the recent years in most developed economies has created a major trend in the residential market: A growth in the interaction between socio-economic and ecological factors, which created an increasing demand for specific housing preferences such as good accessibility and close proximity to green areas, water, and other physical attractions (Riggins, 2011). The presence of such features offers a variety of amenities in densely populated areas including aesthetic attraction, recreational activity areas and access to clean air. Such amenities could provide a price premium on residences which is often omitted or underestimated by urban developers. As a result, a general underinvestment can be observed for the development of natural areas within urban regions, which could otherwise provide a variety of private and social positive externalities.
Externalities are unintentional side effects of an activity affecting people other than those directly involved in the activity. A negative externality is one that creates side effects that could be harmful to either the general public directly or through the environment. An example would be a factory that pollutes as a result of its production process. This pollution may pose health risks for nearby residents or degrade the quality of the air or water. Either way, the owner of the factory does not directly pay the additional cost to address any health issues or to help maintain the cleanliness of the air or water.
A positive externality, on the other hand, is an unpaid benefit that extends beyond those directly initiating the activity. One example would be a neighborhood resident who creates a private garden, the aesthetic beauty of which benefits other people in the community. Also, when a group voluntarily chooses to create a benefit, such as a community park, others may benefit without contributing to the project. Traditionally, both negative and positive externalities are considered to be forms of market failure – when a free market does not allocate resources efficiently. Arthur Pigou, a British economist best known for his work in welfare economics, argued that the existence of externalities justified government intervention through legislation or regulation. Pigou supported taxes to discourage activities that created harmful effects and subsidies for those creating benefits to further encourage those activities. These are now known as Pigovian taxes and subsidies.
Residential property according to Golubchikov and Badyina (2012) is one of the basic social conditions that defines the quality of life and welfare of the people and places. Residential property is globally accepted as second most important human need after food and is considered as one of the most valuable economic asset of every nation (Jiboye, 2013). It is indeed a complex goods which consist of many different aspects including structures which comprises all the physical characteristics of the dwelling, accessibility and facilities that constitute a bundle of services related to Residential property as well as neighbourhood attributes which include the environment and the society in which the dwelling exist (Edward, 1997). Residential property being an essential ingredient that stimulate the growth of Gross Domestic Product (GDP) of any nation, encompasses various attributes which jointly function to determine the market value of the commodity.
However, since the middle of the 20th century, house owners, Residential property investors and house users have struggled to identify the basic factors that influences residential property prices in the global Residential property market (Fernandez et al., 2011). This problem has attracted a lot of interest from researchers, real estate surveyors and other relevant stakeholders concern with residential property development, investment and management. For instance, rental values of a residential properties in a particular residential neighbourhood in most cases differs significantly with rental values of similar residential properties in another residential neighbourhood within the same metropolis. Similarly rental values of similar houses within the same residential neighbourhood also differs due to environmental externalities.
Quality of the environment is also another factor that affects the values of land. Land value does not only depend on the physical characteristics of a building but also the environment that surrounds the building, it is against this background that this seek to examine the influence of environmental externalities on value of residential properties.
1.2 Statement of the problem
The increasing rate of variations on rental values of residential properties among varying residential neighbourhoods in many towns and cities in Nigeria in recent time has continue to dominate discussions within the spheres of practicing estate surveyors and valuers, property; owners, investors, users, estate brokers, as well as policy makers on housing investment and management in Nigeria. Although various studies on housing and environmental externalities have been carried out globally, identified condition of dwelling characteristics, attributes of residential location and neighbourhood attributes as the leading factors that causes housing prices variations (MacDonald & MacMillan, 2007; Kiel & Zabel, 2008; Anthony, 2012), however, most of these studies are foreign base with only a handful of them conducted in some part of Nigeria. This implies that the impact of environmental externalities on value of residential properties in many Nigerian towns and cities including Nasarawa, the study area, are yet to be investigated and thus, account for the negligible attention being given to condition of residential dwellings and neighbourhood attributes by homeowners, housing investors and the policy makers.
Thus, by examining the impact of environmental externalities on rental values of residential properties, not only the homeowners and housing investors in the area that could benefit from the findings but also the real estate surveyors and valuers and the policy makers would as well benefit from it. Since the influence of the housing attributes on house rental value will be established, all the relevant stakeholders can better understand the causal factors for the variation of rental values of residential properties in the area.
1.3 Aim and Objectives of the Study
The aim of this study is to examine the influence of environmental externalities on value of residential properties.
To accomplish the above aim, the following research specific objectives shall be pursued:
- To identify the types of environmental externalities in Nasarawa town
- To assess the current condition of residential properties and environmental externalities in Nasarawa
- To evaluate the locational characteristics of the various residential areas that affect rental values of residential properties in the study area.
- To create profile of annual rental values of residential properties relative to environmental externalities within the neighbourhood
- To evaluate the impact of environmental externalities on values of residential properties.
1.4 Research Questions
- What are the types of environmental externalities in Nasarawa town?
- What is the current condition of residential properties and environmental externalities in Nasarawa town?
- What are the locational characteristics of the various residential areas in Nasarawa town?
- What is the current annual rental value of residential properties in Nasarawa town?
- Do housing and environmental externalities have any influence on values of Residential properties in Nasarawa town?
1.5 Scope of the Study
For the reason of interest and available resources at researcher’s disposal, the study is limited to the examination of the influence of environmental externalities on value of residential properties in Nasarawa. The scope of the study is further limited to Abdulrazak street and living faith road Tammah area of Nasarawa town and residential properties such tenement building, self-contain and flats shall be the focus of this study.
1.6 Significance of the Study
The study of environmental externalities as it affect values of properties became imperative as it will go a long way in addressing many un answered questions related to house prices, house quality and environmental externalities. Establishing the relationship that exists between values of property and the various components of neighbourhood is very crucial to Estate Surveyors and Valuers, Urban Planners and policy makers alike.
The study apparently may provide a useful and significant guide to practicing estate surveyors and valuers in ascribing and determining rental values of properties in the study area. The study is also necessary as it is expected to bring to light the social and economic consequences of mixing incompatible land uses which could adversely affect the potential rental values of properties. Urban Planners may be guided in this direction when designing a layout or Master plan for an area.
The findings of this study may also assist in drawing the attention of the government and other relevant bodies concerned with housing and environmental health in realizing the need to enforce quality housing provision and decent environment as the health and economic implication of poor quality housing and environment will be exposed. Investors may also find the study useful as it will assist them in making crucial investment decisions with respect to the type and quality of houses and residential location that could yield maximum returns.
1.7 Definition of Terms
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, 2003)
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 (Omole, 2001)
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 (Ogbodo, 2012).
Residential: this can be defined as block of flats or bungalow duplex e.t.c in an area of a town suitable for living and consisting of houses rather than factories or office.
Values: The term value means the worth of something or how much something is worth in money or other goods for which it can be exchanged.
1.8 The Study Area
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.
