EFFECTS OF ABANDONED MINING SITES ON REAL ESTATE TRANSACTIONS IN AZARA, AWE LOCAL GOVERNMENT AREA, NASARAWA STATE

 

EFFECTS OF ABANDONED MINING SITES ON REAL ESTATE TRANSACTIONS IN AZARA, AWE LOCAL GOVERNMENT AREA, NASARAWA STATE

 

ABSTRACT

Mining activities apart from adding to the revenue base of individuals, families and the government has negative effect on the land cover and residents that adjoins the area, particularly, where such activities are done outside the regulatory framework. It is in this light that this study assesses the effects of abandoned mining sites on resident’s health, environment and Real Estate business in Azara, a suburb of Awe LGA, Nasarawa state. Information relating to the effects of abandoned mining sites was obtained through administration of 155 structured questionnaires to residents of Azara, out of which 127 were returned and used for analysis. Descriptive statistics and Likert scale were used for the analysis. It was discovered that abandoned mining sites in the neighbourhood are breeding grounds for mosquitoes, death traps to young children, building collapse and degradable environment among others. It is therefore worthy to note from the findings that, the demand for land in the area is low and the amount paid for real estate properties in the area is adversely affected due to the negative effect of the abandoned sites on resident’s health and the environs. This study recommends that residents should be educated on building houses close to the abandoned mine sites and the areas should be fumigated. Also, the government of Nasarawa state should enforce environmental regulation to ensure that all disturbed land and abandoned mines are restored and reclaim to its original state after mining operations and approval to initiate mining should be mandatorily preceded by an Environmental Impact Assessment (EIA).

 

 

CHAPTER ONE

1.0  Introduction

1.1Background of the Study

Natural resources (metallic,non-metallic minerals and fossil fuels) are important to the development of any country. The general importance of mining sector has been documented to include foreign exchange, employment and economic development (Obaje and Abba, 2005, Nwajiuba 2000).

Artisanal and small-scale mining is a means of livelihood adopted primarily in rural areas. This is sometimes called informal sector, which is outside the legal and regulatory framework (Azubike, 2011). When not formalized, organised, planned and controlled,artisanal and small-scale mining can be viewed negatively by government and environmentalist because of its potential for environmental damage, social disruption and conflicts (Opafunso, 2010).

Abandon mining sites are areas of mining that are no longer maintained or put to mining land use. These abandoned mining sites have spill over effect on the amount paid for Real Estate/properties in the areas where mining activities has taken place. This is as a result of its negative consequences in the environment (Yacim, 2013).

It is based on the above that this study is set to assess the effects of abandoned mining sites on real estate transactions in Azara, Awe local government area of Nasarawa state. Such a study will highlight the influence of abandoned mining sites on the value of propertiesproximate to the abandoned mining sites and in other areas of Azara.

 

1.2Statement of the Problem

Transaction in real estate is a function of demand and supply. The demand for land in the study area seems to be lopsided in favour of some areas as against some. It is to this end that this research seeks to assess the effects of abandoned mining sites on real estate transactions and how abandoned mine sites affects the residents and residential environments.

1.3Aim and Objectives

This study is aimed at assessing the effects of abandoned mining sites on Real Estate transactions in Azara. To achieve this aim, the following objectives were formulated;

1-      To identify areas of abandoned mine site in Azara.

2-      To identify the causes of abandoned mine site in the study area.

3-      To identify the problems associated with abandoned mine sites.

4-      To identify the nature and type of real estate transactions

5-      To determine the effects of abandoned mining sites on residents and Real Estate transactions.

6-      To proffer solution or suggest policy recommendations.

1.4Research Question

The study seeks to provide answer to the following questions:

1-      Where are the areas of abandoned mine sites found in Azara?

2-      What causes of abandoned mine in the study area?

3-      What are the problems associated with abandoned mine sites?

4-      What is the nature and type of real estate transactions in Azara?

5-      What are the effects of abandoned mining sites on residents and Real Estate transactions?

6-      What are the solutions or policy recommendations that can be proffered?

 

1.5 Significance of the Study

This research work will help to give solution to the problems associated with abandoned mining sites and serves as a guide to residents living close to the abandoned mining sites. It will also serve as a reference material to students, subsequent research and vital information to the environmental agency and Real Estate developers.

1.6 Scope and Limitations of the Study

This research work will emphasise on the study of the effects of abandoned mining sites on real estate transactions in Awe local government area, with particular emphasis on Azara town. It is however important to state that the research is confined to Azara area only and will dwell on Real Estate transactions in the study area.

Constraints Encountered

Though the researcher faced different challenges in the course of this research like manipulation of data by respondents for personal reasons, efforts were made to ensure that genuine data was obtained. Hence, all the data collected and presented on which all inferences and conclusion are made, were made as accurate as possible.

1.7 Definition of Operational Terms

It will be appropriate at this stage to define some terms as used in the carrying out of this study, viz:

-          Mining:refers to the extraction of mineral deposits from the surface of the earth of from beneath the surface.

 

-          Mining sites:  Mining sites are areas where ores for mining can be found. These may be above ground (sites) or underground (mines).

-          Abandoned mining sites: These are areas of mining that are no longer maintained or put to mining land use.

-          Real Estate: Real Estate or Real Property constitute of the bundle of rights and possession of land and landed properties.

-          Real Estate Transactions: refers to a system of transactions between landowners, land users and estate agents.

1.8 Historical background of the study area

Azara is a populated place, a suburb in Awe local government area of Nasarawa state. It is located at an elevation of 224 meters above sea level and its population amounts to 71,657.

Its coordinates are 8⁰ 22’0” N and 9⁰ 15’0”E in DMS (Degree Minute Seconds) or 8.36667 and 9.25 (in decimal degrees).

Azara is bounded by Benue and Taraba states from the southern landscape of Nasarawa state. The area is blessed with mineral resources such as Barites, Pyrite, Clay, Galena, Limestone, Sodium Chloride, among others.

Artisanal and small-scale mining of barite has become a major occupation of the rural mining communities in and around Azara especially during the dry season when the farming activity has ended. The activity provides a major source of income and uplifting the economic well-being of Azara community and environs. The major inhabitants of the region are the Alagos, the Koros, and the minor settlers such as the Hausa fulani, the Tivs and the Kambaris.

 

 

 

The Concept Of Vacancy and Occupancy Rate

Vacancy Rate is the measurement expressed as a percentage of the total amount of physically vacant space divided by the total amount of existing inventory. Vacant space is defined as space that is not currently occupied by a tenant, regardless of any lease obligation that may be on the space. Vacant space could be space that is either available or not available. For example, sublease space that is currently being paid for by a tenant but not occupied by that tenant, would be considered vacant space. Likewise, space that has been leased but will not be occupied until some date in the future would also be considered vacant space.

 

Vacant space is also only counted in existing or already built buildings. Under construction or proposed space is excluded from the vacancy calculation. Rosen and Smith (1983) defined natural vacancy rate in a manner analogous to the natural unemployment rate as the vacant stock required to facilitate the search needs of tenants looking for office space as well as the search needs of landlords looking for tenants . According to In his study, Chinloy (1996) profits and, as such, it depends on their expectations with respect to office space demand and the marginal cost of holding vacant units.

 

Vacancy rates have been identified by numerous researchers as a key variable linked to rent cycles and building cycles. Wheaton (1987) analysed national office building construction activity and vacancy rates in a post-World War II era and identified a strong relationship between office employment changes and both supply and demand variables and observed that supply responded more quickly than demand during the period. Other empirical studies which have examined the cyclic movement of the commercial property market include Kling and McCue (1987).

 

In their study, Voith and Crone (1988) analysed office market vacancy rates in seventeen large metropolitan areas in the United States for the period, June 1980 through June 1987. They identified clear indications of cyclic vacancy rates and market differences between metropolitan areas, both in cycle frequency and amplitude. Also, they found that the natural (structural) vacancy rate was upward sloping in thirteen metropolitan areas, almost constant in two metropolitan areas and slightly downward sloping in two metropolitan areas during this period, which included two recessions. They concluded that inter-market variations were significant.

 

Wheaton and Torto (1988) examined national office data for the period between 1968 and 1986 and found a clear indication that office vacancy rates and real rents were cyclical. The peaks and troughs of the real rent cycle lagged the trough and peak, respectively, of the vacancy rate cycle by about one year. They suggested that both tenants and office managers apparently recognized the need for real rent adjustments in response to vacancies above and below the structural (natural) vacancy rate. In the United States, the natural vacancy rate was about 7.5% in 1968, but by 1988 it had increased to nearly 12%.

 

Wheaton and Torto (1988) extensively documented evidence of real estate cycles, but cited the failure of existing explanations to provide a satisfactory answer for the boom-and-bust behaviour in real estate markets. The severity of the boom-and-bust cycle has been attributed to developers lagging optimum timing, building too late in the boom, and continuing to build into the bust (Wheaton &Torto, 1988).

 

In their study, Gordon et al. (1996) examined office market volatility in the commercial property market in the United States using office rental data from thirty-one metropolitan areas over the time period 1978 through 1995, and the change in vacancy rate over time as its measure of the real estate cycle. They found that different metro areas behave differently over time and that some office markets have longer cycles or less volatility than others. Their study also focused on identifying economic factors to determine the underlying causes of office market cyclicality. Their analysis suggests that movements in vacancy rates are likely to be affected by different factors at different stages of the cycle.

 

The natural vacancy rate of real estate draws its parallel from the natural unemployment rate in labor markets. In the labor market, 0% unemployment is never optimal due to frictional forces of the labor market. Because job searching requires time, the duration spent searching for a job produces a level of frictional employment in the labor markets. Without vacancies in the labor market, you would have to find someone who occupies the job you want, and also wants the job that you currently have.

 

This concept can be similarly applied to the real estate market when thinking about a natural vacancy level. The theory of a natural vacancy rate in the real estate market asserts that real estate markets in reality is not frictionless, and thus cannot operate at a true equilibrium (where supply equals to demand, thus resulting in zero vacancy). Due to the decentralized nature of real estate markets, it can be highly difficult for a landlord to be matched with the best available tenant. As a landlord, the objective is to find the best tenant who will be willing to pay most for a certain space. Because of this, landlords will anticipatorily set high rents so that not all tenants will be interested in the lease (Krainer, 2001). As such, even in equilibrium we expect there to be vacancies due to the inherent friction present within the market (Wheaton 1988).

 

Knowing the natural vacancy rate of any given market can yield highly useful knowledge for landlord and investors. If the actual vacancy rate is below the natural rate, rents will rise. The excess demand in the market will prompt an increase and rents, subsequently driving vacancy back up to its equilibrium level. Conversely, when the actual vacancy rate is above the natural level, prices will go down as due to the excess supply in the market. Thus, the natural rate is along run equilibrium determined by structure of the economy. The natural vacancy rate can then be defined as the equilibrium level of vacancy where there is no pressure to either increase or decrease rents. Beyond knowing the direction of future pricing, knowing the natural vacancy rate of a rental property will also help guide investment decisions. In the long run, investing in a market where the natural vacancy is low or declining will yield a higher return on investment than otherwise, ceteris paribus.