COMPARATIVE ANALYSIS OF RENTAL VARIATION IN RESIDENTIAL AND COMMERCIAL PROPERTIES IN NIGERIA(A CASE STUDY OF OLD GRA PORT HARCOURT)
CHAPTER 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 thecountry. This is as a result of the economic recession
which compelled the unemployed and public servants toexplore trading activities in addition to their normal jobs. The investors’ reaction to this
development has been toincrease the number of commercial outlets at the expense of residential property developments. Therefore inmany towns and cities
of Nigeria, open spaces within the vicinity of public institutions have been irrationallydeveloped to accommodate shops and other retail outlets. The
situation is further compounded with the perceivednotion among Nigerian property investors that commercial property performs better than residential
propertyinvestment (Smith, 1986). However, the investors can no longer base their decision on intuitive grasp of the market which Ajayiand 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, voices, 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, traic 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.
