Factors influencing the choice of property portfolio diversification evaluation techniques in Nigeria

Abstract

Purpose -The purpose of this paper is to examine the factors that have influenced the use of implicit (naïve) techniques in property portfolio diversification evaluation in the Nigeria property market. This is necessitated by the need to look at the ways by which the property portfolio diversification evaluation practice in the market could be made to improve and adjust to ever changing global trends in this area. Design/methodology/approach -The authors of this paper administered questionnaires, backed up with interviews, on 28 institutional property investors and 128 real estate practitioners in three locations (commercial nerve centres) of the country, namely, Lagos, Abuja and Port-Harcourt metropolitan areas. Data were analysed with the use of frequency distribution, mean and standard deviation measures, relative importance index and Pearson Chi-Square test. Findings -The results of the study in this paper revealed, among others, that lack of time series data and the small size of many of the investors' portfolios in Nigeria encouraged the use of implicit analysis in their property portfolio evaluation techniques. The study also showed that investors and practitioners detest complex calculations and were using traditional evaluation techniques because they considered the methods as needing no pre-requisite knowledge before they could be used. Practical implications -The study in the paper concluded that there is the need for a restructuring of the Nigerian real estate education and portfolio evaluation practice and the use of a micro-real estate specific data derived from local market information to develop property performance indices towards building up functional real estate indices at the regional and national levels. Originality/value -This paper is a pioneering attempt at establishing the factors that influenced the use of implicit techniques in property portfolio diversification evaluation in emerging property markets like Nigeria.

Urban Real Estate Markets: a Catalyst for Economic Growth and Development - the 14th African Real Estate Society Conference

“…There are no specialist firms; that is, all firms carry out all manner of real estate consultancy services and less than 1% has foreign affiliation or has a branch outside Nigeria. These findings agree substantially with that of Babawale and Koleoso (2006); Ogunba andAjayi (2007 andBabawale, 2012). All the banks surveyed for this study agreed that the valuation jobs are being carried out by registered estate surveyors and valuers and that most of the banks have list of valuers retained to undertake their credit related valuations.…”

Commercial Real Estate Market Forecasts: Complexities and Methodologies in the Lagos Mega City

“…In a world where real estate investment is driven by foreign direct investment (FDI) through various investment vehicles for example venture capitals, private equity funds, property derivatives and a host of others, investors require quantitative and sound investment analysis for decision making. This result is surprising because studies carried out over a decade ago on valuation methodologies in the Nigerian real estate market revealed this same trend (Olaleye, Aluko & Ajayi, 2007;Olaleye, 2008). The implication of this is that recommendations emanating from such studies were not implemented and the Nigerian professionals are yet to start complying with global real estate trend.…”

“…Babawale (2006) has identified skill, experience and judgment of the valuer among the factors that lead to inaccuracy in valuations and these also has far reaching role to play in real estate market forecasts. In another study by Olaleye, Aluko and Ajayi (2007) and Olaleye (2008) naive diversification were the preferred strategies in the Nigerian property market and this was attributed to inadequate knowledge base of the real estate professionals in an era where the drive towards the integration of quantitative analysis into property investments across the whole spectrum of property investment analysis, property portfolio management, performance evaluation and diversification has increased. These present obvious problems that can be addressed by appropriate research.…”

An Evaluation of the Investment Maturity of Property Markets in Southwestern Nigeria

“…There have been a few studies on market maturity in Nigeria. These include: Olaleye (2007), Ajibola (2010), Dugeri, (2011); Akinbogun, (2012), Thontteh (2013), Olapade (2014) and Dugeri, Omirin and Ogunba (2014). However, most of these studies largely focused on the commercial property market.…”

“…Moreover, most of these studies did not actually discuss market maturity with the comprehensive Keogh and D'Arcy (1994) frameworks (indicators) of maturity. For example, the maturity studies of Olapade (2014), Olaleye (2007) and Ajibola (2010) focused on data availability which is just one of the indicators for measuring market maturity. The findings of such data-availability-focused maturity studies are useful in demonstrating that data deficiency is a major challenge facing the Nigerian property market (which have resulted in low valuation accuracy and low foreign direct investment) and that there is need for a detailed policy response to the problem of deficiency of information flow.…”