IMPACT OF INFLATION OF RENTAL VALUES OF COMMERCIAL PROPERTIES IN JOS, NIGERIA
ABSTRACT
This study aimed at assessing the impact of inflation on rental values of commercial properties in Jos metropolis. Rental values and Inflation were examined. Pertinent Literatures were reviewed on the subject matter and data were collected which included both primary and secondary data. Questionnaires were administered, with oral interviews and field survey. The trend in rental values and inflation was examined for the study period, 1990-2014. It is important to state that the type of commercial properties analyzed in the study locations were basically shops and offices. The collected data were analyzed using descriptive statistical techniques, Analysis of Variance (ANOVA) and Regression analysis. The results show that unexpected inflation affects the rents of commercial properties in Jos by 15.5% this shows that commercial property is a good hedge against inflation. It is recommended that NIESV Jos branch should ensure that for every location, there should be a range of rent per meters square so as to avoid over pricing of rent by the landlords.
TABLE OF CONTENT PAGES
Title page
Declaration ii
Certification iii
Dedication iv
Acknowledgements v
Abstract vi
Table of content vii
List of tables xi
List of figures xii
CHAPTER ONE 1
1.0 Introduction 1
1.1 Background of the study 1
1.2 Statement of the problem 3
1.3 Aim and Objectives of the study 3
1.4 Research Questions 4
1.5 Research Hypothesis 4
1.6 Scope of the study 4
1.7 Significance of the study 5
1.8 Limitation of the study 5
1.9 Geographical Location of the Study Area 5
1.10 Population and Economic base of the study area 6
1.11. Tourism and Religion 7
CHAPTER TWO 12
2.0 Literature Review 12
2.1 Commercial property investments and rental growth expectations of investors
in Nigeria 13
2.2. Inflation 13
2.2.1 Categories of inflation 14
2.2.2 Types of inflation 16
2.2.3 The general effect of inflation 17
2.2.4 Inflation control 18
2.3 Concept of rent 19
2.4.1 Rental value 20
2.4.2 The Bid Rent Theory 20
2.4.3 Modern Theory of Rent 21
2.5 Types of Rent 21
2.6 Factors determining rental value 22
2.7 Concept of Property 23
2.7.1 Classes of Property 24
2.7.2 Types of Property 25
2.7.3 Commercial Properties 27
2.7.4 Types of Commercial Properties 27
2.8. Empirical Review 29
CHAPTER THREE 32
Research Methodology 32
3.1 Population for the Study 32
3.1.1. Sampling Frame 32
3.1.2 Sampling Element 32
3.2 Sampling Technique 32
3.3 Sampling Size 32
3.4 Methods of Data Collection 33
3.5 Sources of Data Collection 34
3.6 Data Handling Techniques 34
CHAPTER FOUR 36
Data Presentation, Analysis and Discussion of Results 36
4.1 Data for the Study 36
4.2. Rental Levels of Commercial Properties in Jos Metropolis from 1990-2014. 37
4.3. Analysis of Data 39
4.3.1. Rental Growth of Commercial Properties in Jos 44
4.3.2. Rental Growth of Shops 44
4.4. Analysis of Variation in Rent/m2 Across Commercial Properties in Jos. 46
4.5. Inflation Rate in Nigeria. 47
4.6. An Extermination of the Effect of Inflation on Rents of Commercial
Properties in Jos. 50
Testing of Hypothesis 56
4.7. Discussion of Results 56
4.7.1 Examine the Rental Levels of Commercial Properties in the Study Area. 56
4.7.2 Determine the Variation in Rent Across Commercial Properties
(Shops and Offices) 57
4.7.3 Examine the Trend of Inflation Rate in Nigeria. 57
4.7.4 Examine the Effect of Inflation on Rents of Commercial Properties in Jos. 57
CHAPTER FIVE 58
Summary of Findings, Conclusion and Recommendations 59
5.1 Summary of Findings 59
5.2 Conclusion 60
5.3 Recommendations 61
Reference 62
Appendix 64
LIST OF TABLES
Table 3.3: Number of Questionnaires Administered and Retrieved 33
Table 4.1A: Average rental values of commercial properties in the various locations
in the study Area 37
Table 4.2.: Statistics on Rent/m2 for Shops 40
Table 4.3.: Statistics on Rent/m2 for offices 41
Table 4.4A: Average Rental Growth Rate of Rental Values of Commercial Properties
in Jos (1990 – 2014) 42
Table 4.5.: Test of Homogeneity of Variances 46
Table 4.6.: Analysis Of Variance (ANOVA) 47
Table 4.7: Correlation of actual, expected and unexpected inflation rate 49
Table 4.8: Regression result for Shop Rent and Inflation Rates (Group 1) 50
Table 4.9: Regression result for Shop Rent and Inflation Rates (Group 2) 51
Table 4.10: Regression result for Shop Rent and Inflation Rates (Group 3) 52
Table 4.11: Regression result for office Rent and Inflation Rates (Group 1) 53
Table 4.12: Regression result for office Rent and Inflation Rates (Group 2) 54
Table 4.13: Regression result for office Rent and Inflation Rates (Group 3) 55
Table 4.14: Regression Result for Average Commercial Property Rent and Unexpected
Inflation Rates 56
LIST OF FIGURES
Fig. 1.1: Nigeria showing Plateau State 8
Fig 1.2: Plateau State 9
Fig1.3: Google earth map of study area. 10
Fig 1.4: Location Map of the study area 11
Figure 4.1: Rental Growth of Shops in Jos 44
Figure 4.2: Rental Growth of Offices 45
Figure 4.2: Trend in the Inflation Rate in Nigeria 4
CHAPTER ONE
1.0 INTRODUCTION
1.1 Background of the study
Property investment has been considered as an investment that is very lucrative in the economy of most nations and it is a major investment option that gives investors the courage to invest because it is recognized to have inflation hedge. Unlike other assets class, commercial properties are types of properties that are owned to generate income. It is heterogeneous, physically modifiable and segmented asset which is treated separately (Hendershott et al., 2000). It houses most locations where economic activities take place within an economy. As an investment asset, it represents a means for accumulation of wealth by investors. According to Ibottson and Associates (2001), commercial properties and real estate constitute more than half of the economic wealth in the world.
The economy of Jos has grown significantly well from an agrarian and tourism driven to a business oriented one. The property market of Jos is assumed to be doing well in the sense that property investments with reference to commercial properties in this area has become `particularly strong and generated huge capital profit to its owners. As commercial properties are important part of Jos landscape, which service both the business and financial aspects of the locality, it contributes immensely to the growth of real Gross Domestic Product (GDP).
IMPACT OF INFLATION OF RENTAL VALUES OF COMMERCIAL PROPERTIES IN JOS, NIGERIA
