Market Rent Determinants of Residential Apartments in Addis Ababa, Ethiopia

Abstract

Rapid urbanisation and population growth increase the demand for housing. Given its importance to human wellbeing, the right to housing is recognised in international, regional and domestic legislation. The rental housing sector is the major form of housing tenure in Ethiopia. Given financial constraints, Ethiopian tenants tend to rent instead of buying property. However, there are no well-developed procedures that guide how rental value is determined in Ethiopia. As such, the purpose of this study is to identify monthly rent determinant variables of residential apartments in Ethiopia. Substantial empirical results from different countries indicate that rental value is a result of the combined contribution of the integrated components: property, amenities, and externalities. For this study, a multiple regression model was used for 164 samples taken from three purposefully selected case study areas in Addis Ababa (CMC, Jemo and Kazanchis). The regression results indicate that nine significant variables were determinant variables of monthly rent at a 95% confidence interval. This study may contribute decisive information for Ethiopian property managers, real estate developers, income tax assessors, real property owners, lending institutions and other interested real estate professionals. It allows these stakeholders to more accurately estimate the monthly rental value and market value of properties for their business evaluation.

Modelling apartments values in the Nairobi metropolitan area, Kenya

“…These structural characteristics were found to be statistically significant in influencing the apartment prices in the study area but were omitted in the final model to cure the collinearity problem. However, the findings of the study differ from several existing studies that have established that age, security, access to a balcony, provision of lifts and the entire plot size are important variables influencing apartment values (Abidoye and Chan, 2018;Belete and Yilma (2020); Ferlan et al (2017); Kieti and Ogolla, 2021;Randeniya et al (2017); Oduwole and Eze, 2013, just to mention but a few). The findings of this paper have established that these variables are statistically insignificant in affecting apartment values in the NMA, reinforcing the need for a specific valuation model in a specific property market due to the heterogeneity nature of the real estate and the subjective nature of the consumers' utility.…”

“…The findings of this paper generally reinforce the consensus that property values are influenced by their internal and external attributes: structural, locational and neighbourhood characteristics (see for example Brett et al, 2003;Kieti and Ogolla, 2021;McCluskey and Borst, 2007;Thanasi, 2016). Several studies, for instance, have found apartment size to be the most significant factor influencing its value positively (see Ahmed and Yacim, 2018;Belete and Yilma (2020);Nguyen, 2020;Randeniya et al (2017);Thanasi, 2016;Sirmans et al, 2005, amongst other studies). Similarly, location (usually measured in distance from the CBD) has been identified by most existing studies as an important variable negatively influencing property values (see for example Ayan and Erkin (2014); Ferlan et al (2017); Frew and Wilson, 2002;McCluskey and Borst, 2007;Randeniya et al (2017); Oduwole andEze, 2013, Ottensmann et al, 2008, amongst others).…”

“…Additionally, Ahmed and Yacim (2018) found that the number of rooms, age and size of the property, location, water sources, walling materials and the type of toilet are also important variables influencing property values in the Nasarawa area, Nigeria. Similar observations were made by Belete and Yilma (2020) in Ethiopia who determined that the monthly rental value of apartments is influenced by the size of the apartment, security, access to a balcony, access to road and parking space, the number of bedrooms, provision of lift, the type of external wall finish and location. Their study established that the floor level, environmental pollution, view, access to water and bathroom were not important attributes.…”

“…The number of bedrooms and bathrooms has also been found to have a positive influence on the property prices (Ahmed and Yacim, 2018;Thanasi, 2016;Randeniya et al (2017); Oduwole and Eze, 2013). However, some studies have established a negative association between the number of bathrooms and property values (see for example (Belete and Yilma (2020); Nguyen and Cripps, 2001)). These structural characteristics were found to be statistically significant in influencing the apartment prices in the study area but were omitted in the final model to cure the collinearity problem.…”

“…It is interesting to note that some results of the HPM analysis of factors influencing the value of apartments, also known as flats, are sometimes contradictory. Nguyen and Cripps (2001) and Belete and Yilma (2020) established a negative correlation between the number of bathrooms and property values while Oduwole and Eze, 2013 found a positive association between the two variables, probably signifying the heterogeneous nature of the real estate. In addition to the number of bathrooms influencing the value of apartments, Oduwole and Eze, 2013 also determined that the number of rooms, plot size, access roads, proximity to the CBD, electricity provision, schools and the crime rate are also important variables.…”