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07030248044CHAPTER ONE
INTRODUCTION
1.1 BACKGROUND TO THE STUDY
The study of rental variation of real estate investment, whether residential or commercial, is very important at this time when emphasis is on investment performance analysis in many parts of the world. This is even more important in Nigeria where only few studies have been carried out on the rental variation in residential and commercial property achieved by property investment. Moreover the impact of the ongoing changes in the global and local economy on the value of real estate investment is serving to highlight the need for its careful consideration in the investment decision making process (Palmquist, 1980).
Since 1990s, the demand for commercial outlets has risen astronomically in most urban centers in the country. This is as a result of the economic recession which compelled the unemployed and public servants to explore trading activities in addition to their normal jobs. The investors’ reaction to this development has been to increase the number of commercial outlets at the expense of residential property developments. Therefore in many towns and cities of Nigeria, open spaces within the vicinity of public institutions have been irrationally developed to accommodate shops and other retail outlets. The situation is further compounded with the perceived notion among Nigerian property investors that commercial property performs better than residential property investment (Smith, 1986). However, the investors can no longer base their decision on intuitive grasp of the market which Ajayi and Fabiyi (1984) considered inadequate for success in property ventures.
The central theme of this study therefore is to examine the rental variation of residential and commercial property investments in the study area. This will provide for better investment decision and risk management for real estate investors in Nigeria.
Commercial properties are properties generally occupied for the purpose of carrying on a trade or profession in the expectation of realizing profit. They comprise mainly of shops, offices, showroom among others and they command the highest rent out of the other types of properties uses. Rent provides the basis of value for landed property and the trends in Land values are of significance in the prediction and determination of income from real property. Also, the income realizable from real estate is required in evaluating the viability of projects. A number of factors combine together in determining changes which property values undergo which are of great concern to the Estate managers and valuer.
1.2 STATEMENT OF THE PROBLEM
The issue of fair valuation of residential and commercial real estate properties has been a major challenge in Nigeria. Indeed, not much has been done in the area of valuing residential housing units and commercial/business complex in the economy.
Nevertheless, in recent times, the literature on real estate has seen a number of techniques and models developed in a bid to achieve efficient valuation of residential houses. The use of artificial neural networks has been the most popular and recent in this regards. In the advanced economies, the use of artificial neural networks is now predominant in several fields including tax assessment, medical diagnosis, bank risk analysis, stock analysis & control, traffic control, and real estate valuation etc (Moral - Esperanza, 2004).
In Nigeria, unlike in many other economies, the use of artificial neural networks (ANNs) in actual valuation of housing units has not been done (Eriki & Udegbunam, 2008). It is against this background, that this study examines the fairness or otherwise, of the price fixing mechanism for residential and commercial properties in Nigeria.
1.3 OBJECTIVES OF THE STUDY
The following are the objectives of this study:
1.4 RESEARCH QUESTIONS
1.5 HYPOTHESIS
HO: There is no variation in the rental value of residential and commercial properties in Nigeria.
HA: There is variation in the rental value of residential and commercial properties in Nigeria.
1.6 SIGNIFICANCE OF THE STUDY
The following are the significance of this study
1.7 SCOPE/LIMITATIONS OF THE STUDY
This study on the comparative analysis of rental variation in residential and commercial properties in Nigeria will cover the present value of residential and commercial properties in Nigeria which will form the basis for comparison.
LIMITATION OF STUDY
Financial constraint- Insufficient fund tends to impede the efficiency of the researcher in sourcing for the relevant materials, literature or information and in the process of data collection (internet, questionnaire and interview).
Time constraint- The researcher will simultaneously engage in this study with other academic work. This consequently will cut down on the time devoted for the research work.
REFERENCES
Ajayi, C.A and Fabiyi Y.L (1984). “A critique of property investment feasibility and Viability appraisal reporting in Nigeria”. Quarterly journal of administration April/July, 161-169
Eriki PO, Udegbunam RI (2008). Application of neural network in evaluating prices of housing units in Nigeria: A Preliminary investigation. J. of artificial Intell. 1(1): 21-27.
Palmquist RB (1980). Alternative techniques for developing real estate price indexes. Review of Economics and Statistics. 62(3): 442-448.
Smith HC (1986). Inconsistencies in appraisal theory and practice. J. of Real Estate Research. Fall. 1(1): 1-17.
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