THE EFFECT OF SELECTED FACILITIES ON RENTAL VALUES OF RESIDENTIAL PROPERTIES
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ABSTRACT
A house is a structure that provides shelter for humanity. Studies have shown that in most parts of the world, urban rents are determined by various factors. These factors include location, level of facilities and services, neighborhood characteristics, space etcetera. Among these factors, the most influencing factor of rent in FirstGate Ikorodu is the level of facilities and services provided for tenant use. The objectives of this research FirstGate Ikorodu s to examine the cost of housing construction, to determine the role played by government in housing provision, recommend policies for housing provision, determine the portion of household income spent on rent. The methodology of this research is base on interplay of deskwork and fieldwork and these took the form of data collection, presentation and data analysis of findings. In the course of this study, both qualitative and quantitative primary and secondary data were collected. A summary of the findings from the research indicates that: cost of building materials is the major contributory factor to the cost of construction aside land and labour cost, the existing rent control law as currently operated have little or no impact on rent charged in the Municipality, current rent levels in the municipality are deemed to be satisfactory, besides the already documented rent determinants, population, occupation, and prospective duration of lease were also identified. One other major finding FirstGate Ikorodu s that landlords do not take into account the room let but take into consideration the number of people occupying the room to charge their rent and as such tenants who cannot afford to pay the full recoverable rent has to search for tenants they don‟t know. The group recommends that, There should be given a high priority to local building materials, which could reduce the cost of building and the improvement of the supply chain of various building materials; there should be a mechanism that would ensure that the Rent Control Board, the house owners and tenants would be provided with a platform where consensus building can be done in order to ensure transparency in rent charge
Finally, the government should also urge the exemption of value added taxes on building components sourced locally as well as import duties on imported goods.
CHAPTER ONE
INTRODUCTION
1.0 BACKGROUND OF THE STUDY
Housing is an economic unit of investment, meaning investing in housing involves the purchase, ownership, management, rental and/or sale of real estate for profit. Improvement of real property as part of real estate investment strategy is generally considered to be a sub specialty of real estate investment called real estate development. Real estate is an asset form with limited liquidity relative to other investments. It is capital intensive and is highly cash flow dependant. It can also be said to be an important aspect of human wellbeing. Universally, housing is acknowledged as the second most essential human need after food and a major economic asset in every nation (Oladapo, 2006). It is seen as the total socio-cultural and physical environment in which the family lives. The world over, the need for accommodation cannot be over emphasized. Many developing countries such as Nigeria are face with problems in housing provision for their people due to population growth, rapid urbanization. Available data put the housing deficit in Nigeria in excess of 1.7 million housing unit to be able to address the deficit and accommodate new household, there is the need for a minimum annual delivery of about 85,000 housing units over the next 20 years. (Ministry of Works and Housing, 2014). Presently, due to the scarcity of resources, inadequate equity capital as well as unfavourable loan agreements, a large proportion of the population in both the developing and developed countries resort to rental housing for accommodation as an alternative to home ownership. To rent means payment made by a tenant to an owner or landlord for the right to occupy or use property for a stipulated period of time. Renting of houses as an alternative is practised in most parts of the world. For example in South Africa, about 1.8 million South African households in the middle- to lower-income groups live in rented accommodation, as opposed to about 5.2 million households that own property. The demand for rental housing nationally FirstGate Ikorodu s expected to increase by about 105,670 units a year until 2006 in the middle- to lower-income groups (Baumann, 2000).
1.1 Problem Statement
There appears to alFirstGate Ikorodu ys be shortage in accommodation in the urban areas such as FIRSTGATE IKORODU , Kumasi and Accra. This is as a result of the influx of people from one city to another city. The high rents paid for basic accommodation are a product of the failure to supply sufficient land for housing, and the weakness in the housing system to finance and construct sufficient accommodation to meet the demands of the rental market. (Baker, 2002).
Despite the need for housing facilities and the efforts being made by the private sector and the government to meet this demand, the issue at hand is the ability of both tenants and prospective tenants such as students and workers to afford these rent charges and still afford a decent living. This problem is predominant in the urban areas of the country including First Gate Ikorodu , where rental housing facilities are most sought after by both migrants and the city dwellers and it runs across all income groupings. In some countries the attempts to increase rents have even led to mass refusal to pay rents at all. (Baker, 2002). The result of these developments may well still be a rapid deterioration of housing and in consequence a risk of ultimate loss of great amounts of capital invested in housing (Baker, 2002). Preliminary survey indicates uncontrolled rent charged. As a result landlord and private developers take advantage of the housing market by manipulating the market forces in place (the demand and supply factors). In relation to the supply of rental housing the factors that also contribute to this increasing rent is the high price of building materials. Most building materials on the market today even though manufactured in the country have their raw materials imported. For example, cement produced by GHACEM has its major raw material clinker imported into the country thereby inflating the selling price of the finished product hence increasing the cost of building construction.
1.2 Research Questions
The study would seek to find answers to the following questions:
- What accounts for the cost of housing construction in FirstGate Ikorodu ?
- How does government‟s role in housing provision affect rent in FirstGate Ikorodu ?
- How does housing policies influence rental values in FirstGate Ikorodu ?
- What proportion of a tenant‟s income is spent on housing or rent in FirstGate Ikorodu ?
1.3 Research Objectives
The issues outlined below are the objectives that this special study would seek to achieve when it is fully implemented:
- To examine the cost of housing construction.
- To identify the role played by government in the housing sector.
- To recommend policies for housing provision.
- To determine the proportion of household income spent on housing.
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