Comparative Analysis of the Relationship between Inflation and Indirect Real Estate Investments in Nigeria

Comparative Analysis of the Relationship between Inflation and Indirect Real Estate Investments in Nigeria

Chapter one/ Introduction

Background to the Study

The impact of inflation on investment returns of various asset classes have remained a primary challenge  to investors  in  both developed and developing economies. Previous studies have shown that during periods of inflation, some investment assets were observed to underperform, some  co-moved at  the  same rate  with inflation,  others outperformed specified benchmarks, while others provided negative return values (Arnason and Persson, 2012; Akpan and Ogunba, 2015; Dabara, Tinufa, Soladoye, Ebenezer and Omotehinshe, 2018).  Analysis  of specific  investment assets  in  respect of  their  response  to inflation becomes very important to help investors in making informed investment decisions.

 

This is because a wrong investment decision in an inflationary environment could lead to the erosion of the value of investors’ corporate earnings and devaluing of the purchasing power of  investors’  funds  (Bello,  2004;  Park  and  Bang,  2012).  Furthermore,  such  analysis becomes more imperative for specifically real estate investments because of their dynamic nature  and  localization  of  property  market  characteristics  across  divers  geographical locations.

 

The major theory underpinning the impact of inflation on investment returns is the Fama and Schwert (1977) theory on inflation hedging. The debate on inflation and investment returns pioneered by Fama and Schwert (1977) have produced an extensive literature (most of which is based on investment performance of asset classes in developed economies, creating a gap for studies from developing economies). Studies that made up such  literature includes  investigations  of the  inflation hedging  characteristics of  asset classes such as: investments in real estate, REITs (Real Estate Investment Trusts), gold, stocks, commodities, bonds, antiques, equities, and shares among others (Dabara,  Ogunba and Araloyin, 2015). The results of these studies have shown a varying pattern, indicating that there is no consensus on the hedging characteristics of various asset classes in different parts of the world.   An asset is said to be a hedge against inflation if it provides certain degree of immunization (protection) against a rise in the general level of prices of goods and services in an economy (inflation)  over  a period  of  time  (Arnasosn &  Persson,  2012).  The  inflation-hedging characteristics of real estate markets all over the world are of special interest to individual, institutional or portfolio investors because investors who do not give careful consideration to the inflation hedging characteristics of their investments risk  inflation eroding their investments’ real income streams.

 

Inflation hedging studies in  emerging countries are of increasing interest to investors and researchers because of the globalization of investment practices and  the fact that emerging markets  are characterized by a highly speculative nature, economic instability, and lack of liberalization/integration into global real estate markets as well as dearth of literature in this field. Nigeria is presented in this paper as a case study of an African emerging country where the property market is opaque with a high degree of property market immaturity and dearth of literature on hedging capabilities of indirect  investments  in  real  estate  (REITs  and  non  REITs  real  estate  equities)  for prospective investors’ consideration.

 

In the real estate sector, investors have the option of investing in either direct or indirect real estate investment assets (Blau, Nguyen and Whitby, 2015; Ankeli, Dabara, Oyediran, Guyimu  and  Oladimeji,  2015).  Investments  in  direct  real  estate  assets  implies  the acquisition and management of physical properties such as  residential and commercial buildings among others (Lee and Ting, 2009). Investments in indirect real estate on the other hand, denotes investing in a product whose performance is based on some measure of property performance; this includes buying shares or equities in a publicly quoted real estate company such as REITs or non REITs listed property companies (Kim, 2009, Li and Chow, 2015).  Dabara (2015) asserted that ‘one of the reasons for investors’ preference for real  estate  investment  is  its  seeming  ability  to  protect  the  purchasing  power  of  the  investor’s investment funds’. This has made investments in specifically indirect real estate assets such as Real Estate Investment Trusts (REITs) and other real estate equities gain global attention in recent times. Unlike investments in direct real estate assets which were observed to be hampered by its need for huge capital outlay and maintenance cost; the indirect form of investment in real estate was rather seen to be characterized by a more flexible  financial  requirement  which  accommodates  different  categories  of  investors irrespective of  their financial  capabilities. Furthermore,  it was observed  to have  been providing an  encouraging investment  performance that  makes them  very attractive  to investors (Devos, Ong and Speiler, 2016). The Nigerian listed property market is made up of both  REITs and non REITs listed  properties. In Nigeria  currently, there  exist three REITs companies  namely: Skye shelter  fund REITs, Union  Homes REITs and UPDC REITs. Similarly there is only one listed non REITs property company which is the UACN Property  Development  Company.  These  companies  are  listed  on  the  Nigerian  Stock Exchange (NSE) with a combined market capitalization of about ₦72,050,847,955 which is equivalent to $234,693,316 (Dabara, et al. 2018).

 

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Domestic Waste Disposal Practice on Residential Property Investment

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Domestic Waste Disposal Practice on Residential Property Investment

Background to the Study

Household solid waste is one of the most difficult sources of solid waste to manage because of its diverse range of composite materials (Huntley, 2010). A substantial portion is made up of garbage, a term for the waste matter that arises from the preparation, and consumption of food and consists of waste food, vegetable peelings and other organic matter (Slack, Gronow & Voulvoulis, 2005). Other components of household solid waste include plastics, paper, glass, textiles, cellophane, metals and some hazardous waste from household products such as paint, garden pesticides, pharmaceuticals, fluorescent tubes, personal care products, batteries containing heavy metals and discarded wood treated with dangerous substances such as anti-fungal and anti-termite chemicals.

 

Domestic waste also known as “municipal solid waste” is waste that is generated as a result of the ordinary day-to-day use of a domestic premise. It is either taken from the premises by or on behalf of the person who generated the waste; or collected by or on behalf of a local government as part of a waste collection and disposal system. The wastes could be both solid and liquid types; and the way they are going to be handled, stored, and disposed can expose the environment and public health to risks (Zhu, Asnani, Zurbrügg, Anapolsky, & Mani, 2008). Globally, millions of tons of municipal solid waste are generated every day. Urban waste management is drawing increasing attention, as it can easily be observed that too much garbage is lying uncollected in the streets, causing inconvenience, environmental pollution, and posing a public health risk (Zia, & Devadas, 2008).

Rouse (2008) defined Solid waste as “material which no longer has any value to its original owner, and which is discarded”. The main constituents of solid waste in urban areas are organic waste (including kitchen waste and garden trimmings), paper, glass, metals and plastics. Ash, dust and street sweepings can also form a significant portion of the waste. Rouse (2008), opined that; Solid waste management (SWM) involves the collection, storage, transportation, processing, treatment, recycling and final disposal of waste. Systems need to be simple, affordable, and sustainable (financially, environmentally and socially) and should be equitable, providing collection services to poor as well as wealthy households

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the effect of environmental degradation on property values

the effect of environmental degradation on property values in Ikom Urban

CHAPTER ONE

INTRODUCTION

Background to the Study

Generally, speaking problems with environmental degradation are often linked with process of development and therefore have effects on local, regional, as well as global levels. These effects which are the result of human activities have devastating consequences on the environment and so are harmful on human beings, animals and plants and can be passed on to future generations. (Acho, 1998; Danish International Development Agency, 2000; Kjellstrom and Mercado, 2008). In the face of global economic recession environmental degradation poses a great challenge to sustainable development. There are many problems, challenges and opportunities associated with living in the environment today. The earth and its treasure base, is experiencing a siege from all aspects of human endeavours ranging from misuse, abuse and degradation of the environment that have become so easily spotted and there are disruptions every day and almost everywhere. Cultures, economic activities, cultural behaviours and livelihood practices are changing and changing fast as a consequence of the realization that when people have power to extract resources around them for a more fulfilling life, they sometimes unleashed such power with a sense of desperation to solve the increasing and mounting problems of survival and progressive improvement and this leads to environmental degradation. Thus, the desperate quest for self, family or organisational improvement is no longer a future threat but real threat for the future. To look up to the future with optimism, depends to some reasonable extent on how we are able to set the stage for tackling environmental degradation problems of today. This requires an intelligent and well co-ordinated balance has to be maintained between integrated socio-economic development on the one hand, and lifelong preservation of human life and natural resources of mother earth on the other. Human beings are an end in themselves while every other thing is seconded to it without compromising the integrity and sanctity of the human species on earth. It is worth mentioning here that whenever there is an exhibited mismatch between human production systems and practices, and specific attributes of the resource base of the environment, a reversal of such inhibiting mismatch becomes imperative for the restoration of ecological balance. Over the years colonial, military, as well as civilian administrations in Nigeria have not given the required attention needed to environmental issues. As a result of the afore-mentioned environmental resources and their harmonious relations with nature have suffered dire consequences for decades and this remains one of the most intricate problems in Nigeria. Examples of these environmental hazards which have suffered neglect include the gully erosion in the east, the seemingly devastating effect of solid mineral mining on the plateau and the encroaching of desertification in the north to mention a few. The effect of this neglect can be further seen in the Niger delta geopolitical zone of Nigeria where gas flaring and oil spillage in the Niger Delta has wrecked tremendous damage on eco system, health and livelihood of the people. Thus, exploitation of finite and renewable resources of the environment which was meant for sustained economic growth and development has turned out to be a curse. At inception intense exploration, exploitation and consumption of these resources were effectively contained within the carrying capacity of the environment and its renewable potential. However, with passage of time, teeming population, sophisticated technical progress and their overall impact and pressure on the environment, a rethink began to emerge. The challenge in the contemporary situation remained that of a clear need for regulated control of the living environment based on principles of sustainability. It has become evident that the paradigm shift from sustained development to sustainable development in the light of global environmental concerns becomes an imperative. The pressure of demands made on living and finite resources has risen to a height where the former development styles, processes and their products are now inappropriate and incapable of coping with long-term human demands. Essentially therefore, sustainable development has become the enigma for our common future. Pressure placed on the carrying capacity of the earth and its resources is reaching an alarming proportion and now at the front burner of development and environmental issues. In Nigeria for instance, there is both cultural diversity and ecological diversity. With about 250 distinct ethnic nationalities, the ecosystems range from the southern mangrove swamps, rainforests to savannah woodlands, and semi-arid Sahel regions in the north. The country is characterized by varied landscape, climate, soil, vegetation and regional dichotomies. Indeed the country can be studied as a paradigm of the paradox of development in Africa. There is rapid depletion of and degradation of the ozone layer, soil resources, as well as air and water pollution, amongst others in the world. Pollution and deforestation, soil erosion, oil spills, toxic dung and uncontrolled human activities make the environmental situation a grave one. These environmental problems are products of development activities.

This means that the ecology and economy are co-present challenges of our time. This can be seen in the drastic fall in food output as a result of soil infertility, gully erosion which is rampant in present times. The aforementioned problems threaten human existence, and life expectancy rate in Nigeria on a daily basis. This paper therefore aimed at examining the nexus between environmental degradation and sustainable economic development of Nigeria. The paper examined the impact of environmental degradation on economic development of Nigeria. To achieve this purpose, the paper has been structured into six sections with the introduction as section one. Section two dealt with conceptual issues on environmental degradation and economic development. Section three briefly looked at the situation in Nigeria. The section four discussed the impact of environmental degradation on the Nigerian economy. The section five dealt with policy recommendations and section six is the summary and conclusion.

Aim and Objectives

The aim of this study is to evaluate the effect of environmental degradation on property values in Ikom Urban

                        Research Questions

 

In order to comprehend the issues relating to environmental degradation on property values, this research laid three questions as follows.

Does environmental degradation has any effect on property values in Nigeria>

 

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AN APPRAISAL OF TREND IN RENTAL VALUE OF RESIDENTIAL PROPERTY WITHIN THE LAST TEN YEARS

AN APPRAISAL OF TREND IN RENTAL VALUE OF RESIDENTIAL PROPERTY WITHIN THE LAST TEN YEARS

TABLE OF CONTENT

Title page

Certification

Dedication

Acknowledgement

Table of contents

Synopsis

CHAPTER ONE

  • Introduction
    • Statement of the problem
    • Aim and objectives
    • Significant of the study
    • Scope of the study
    • Limitations of the study
    • Study Area (Geographical setting and historical background)
    • Definition of terms

CHAPTER TWO
2.0     Literature review

  • conceptual framework
  • Concept of value
  • Concept of rental value
  • Nature of value
  • Concepts of rent
  • Factors affecting rental values of residential property
  • Concept of property

   CHAPTER THREE

  • Research methodology
    • Target population
    • Method of data collection
    • Sampling frame, sample size and sample tech techniques
    • Research instrument
    • Data analysis

CHAPTER FOUR

  • Data presentation and analysis
    • Data collection, data analysis and data presentation

4.1.1Questionniare administered and retrieved

4.2     The analysis of residential property types

4.3     Trend of residential properties rental values

4.3     Causes of increase in rental values of residential property.

  CHAPTER FIVE

5.0 Summary, recommendations and conclusion

5.1Summary

5.2Recommendations

5.3conclusion

SYNOPSIS

Housing problems in urban centers have often been viewed in terms of qualitative and quantitative inadequacy with or without attention to the problem of increasing rent.

The rent which land and landed properties may generate can be affected by some trends/factors, the aim of this study is to access and probe into the circumstances responsible for the constant changes in rental values of residential properties in the study area which are as follows; the location factors, population, characteristics of neighbourhood, architectural design, income of the people, facilities provided among others. Also, the realism of future technological advancement influences the rental value of property.

The periodic trend in rental value is considered by some landlord/owners as easy access to boost their ego. It is necessary to correct this in an area where development and commercial activities are very rampant and also in an improved speed particularly in GRA of Ilorin.

To determine the trends in rental values of properties considering its location or position in Ilorin metropolis, its level of commercial activities and the population of the people therein. It is important and paramount to estimate and arrive at the most suitable and optimum value for properties in other to forestall the level of its commercial activities and also to encourage continuous developments.

The increment in rental values have been a major setback to some people both individual, organization, government, society etc. which have in one way or the other affected their income generation. The problems have therefore led to changes in property value which remained one of the most persistent and socio-economic problems facing properties in the society at large.

The variation and the rise in the rents of real estate had led to this research work, with the aim of examining the causes, effects and the likely solutions to the problems

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