AN EXAMINATION OF THE IMPACT OF LOCATION ON RENTAL VALUES OF RESIDENTIAL PROPERTIES
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Background to the Study
Consumption and investment are both valid reasons to own residential real estate (Kee, 2022). It is bought for the purpose of owner occupancy since it is a consumption good. Additionally, the goal of the investment (property) may be to get the highest possible return, either via direct selling or leasing. If this is the situation, then the price of the residential property will be of utmost significance to both the landlord and the people living there. As a consequence of this, many people believe investments in this kind of property to be a significant means through which they might amass riches. When landlords are establishing rental prices for residential properties, they take into consideration a variety of factors, including the age of the building, its size, the number of bedrooms it contains, the amenities and services it offers, and so on. These factors all contribute to the final price of the lease. In addition, external variables such as population, income, traffic congestion, proximity to job, availability to public transit, closeness to higher educational institutions, and environmental qualities all have the potential to have a substantial influence on rent (Johnson, 2021).
Therefore, any serious investigation into the nature and behavior of residential property price should recognize that property as a commodity is not a single good, but rather a complex bundle of services or potential services that operate in many dimensions. This is because property is a complex bundle of services or potential services that operate in many dimensions (Nwuba, 2022).
Due to the limited circulation of information about property characteristics, their actual value, and their impact on market values, organizations, available properties, and professional services available in various locations nationwide, Nigeria has a large real estate market that is underutilized. This is despite the fact that the market is relatively untapped. When real estate consultants and practitioners market their properties, they are aware that in order to be successful, their information must be widely disseminated. Additionally, this information must be readily available, easily accessible, dependable, and affordable to property buyers, sellers, and investors in a timely manner, with speed, precision, and accuracy, and at the precise moment when the client needs the information.
When it comes to the housing market, the influence of location is really critical. Housing units are distinct from one another in terms of their surroundings, the kind of community in which they are situated, and their proximity to places of work and retail due to the fact that their locations are permanently set. Because of its location, the neighborhood in which a house is situated might potentially have a significant impact on its market value. For many years, it was often believed that parents should leave their children an inheritance consisting of real estate holdings. The real estate market, on the other hand, is quickly approaching the popularity and significance of the money and capital markets. This is due to the growing awareness that real estate is a significant source of capital appreciation and a solid hedge against inflation.
These days, a man's wealth may be measured in large part by the amount of real estate property he owns. Real estate has remained to be an important factor in the growth of many economic activities despite the increasing complexity of these operations throughout the course of time. Over the last many years, there has been a discernible trend toward an increase in the rental prices of residential property in the state of Lagos. This is due to the fact that Lagos, which is situated along the coast of West Africa, is the most populous metropolis in Nigeria. There are a total of 9,197 roads across the whole city of Lagos. These roads include carriageways, cul-de-sac, lanes, streets, avenue, ways, and crescents (Lagos Street, Map, 2018). Aside from this, the huge financial transactions that take place, the high demand for real estate, the ever-increasing population, and the limited supply of real estate, primarily in major cities like Lagos, Ibadan, Abuja, and Port Harcourt, have made the real estate sector vulnerable to abuse by many dishonest property developers, greedy landlords, unregistered agents, and swindlers who engage in several illegal practices to the detriment of the practitioners, citizens, foreigners, stakeholders (Olujimi, 2022).
In recent years, investors have moved their money away from other types of investments and towards real estate development due to the stability of the returns and the lucrative nature of the industry (Kauko, 2003).
In addition, there has been a growth of and an increase in the quality of residential properties given by investors in order to fulfill demand. This is a direct result of the intense rivalry that exists in the market for residential real estate.
The values of residential properties in Nigeria are influenced by a variety of variables. Among them are factors such as location, demand and supply, accessibility, institutional considerations, and economic considerations. Despite this, there is still a shortage on the market, which has resulted in a rise in both rent and capital prices (Patunola, 2021).
In spite of these benefits, real estate practitioners, financiers, and investors in residential properties are confronted with a lack of data on the effect of location on the value of residential properties and what level of rental income a development project could reasonably be expected to realize in a transaction involving parties who are willing and able to participate. This is a problem because the effect of location on the value of residential properties is a key factor in determining whether or not a property is a good investment.
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