Variance in residential property valuation in Lagos, Nigeria

Abstract

Purpose -Quantitative commentaries in the UK, Australia and other developed economies have generally suggested a high level of valuation accuracy. These important findings need to be developed in other parts of the world to facilitate cross-border property business transactions which globalization promotes. In countries like Nigeria where the property market and valuation practice are just evolving, the one-to-one relationship between valuations and transaction prices observed in more developed economies may not necessarily hold. This paper aims to focus on these issues. Design/methodology/approach -This paper reviews major empirical studies on valuation accuracy with particular reference to the methodology and statistical analyses employed, the results obtained and their limitations. The paper also includes the results of an empirical study on valuation accuracy involving 250 residential properties in metropolitan Lagos, Nigeria. The paper employs error metric and econometric statistical techniques. Findings -The study reveals, among others, that residential property valuation in Lagos metropolis exhibits inaccuracy below industry's acceptable minimum standards. Practical implications -The credibility problem engendered by inaccurate valuation has far reaching consequences on the relevance and future of the valuation profession in the study area. Greater collaboration between professionals and academia in research, information procurement and analysis, improvement in valuers' task environment, a well articulated and encompassing mandatory national valuation standards incorporating effective enforcement machinery are some of the suggested remedial measures. Originality/value -The study draws attention to the potentially grave implications of this result on bank solvency and the attendant negative impact on various aspects of the economy.

Patterns of passage into protected areas: Drivers and outcomes of Fulani immigration, settlement and integration into the Kachia Grazing Reserve, northwest Nigeria

“…World Bank directives for the introduction of structural adjustment programmes in 1986 had severe and lasting negative effects on the economy (Babawale 2007). Many factories closed and industrial employment fell from 335,000 in 1985 to 27,000 in the 1990s with 49% of the population living below the poverty line (Babawale 2007). The incidence of long-lasting violent conflicts under military governance was low, due to the highly centralised governance and the swift crackdown on any such clashes by the army.…”

“…The succession of military and civilian regimes that governed Nigeria until the late 1990s resulted in frequent coups and conflicts among ethnic and religious factions vying for supremacy. World Bank directives for the introduction of structural adjustment programmes in 1986 had severe and lasting negative effects on the economy (Babawale 2007). Many factories closed and industrial employment fell from 335,000 in 1985 to 27,000 in the 1990s with 49% of the population living below the poverty line (Babawale 2007).…”

Sources and reliability of property market information for property valuation practice in Ghana

“…Literature (Babawale and Ajayi, 2011;Otegbulu and Babawale, 2011;PWC, 2012;Ashaolu and Olaniran, 2016) shows that the property market data challenge and its adverse implications on property valuation is not peculiar to Ghana, but across the entire SSA region. For example, Ashaolu and Olaniran (2016) note that Nigerian financial institutions are becoming weary of mortgage valuations prepared by Nigerians due to inadequate data and analysis.…”

“…Professional and ethical property valuations are vital to decision-making, and are in turn critical to the efficient operation of property markets and national economies (Aluko, 2004;Babawale and Ajayi, 2011). This decision-making relates to issues such as: sale, purchase and letting of properties; real estate investment and management; compulsory purchase of land and properties; real estate taxation and insurance; real estate inheritance and settlement; asset sharing, allocation and re-allocation; and government divestiture and privatisation programmes.…”

The role of task complexity in valuation errors analysis in a developing real estate market

“…For instance, in a 2014 report, PWC notes that the lack of consensus on valuations is one of the main reasons for the failure of transactions that enter formal due diligence in developing economies, such as those of SSA. Although a few studies, such as Babawale and Ajayi (2011) have been conducted in some constituent economies, the growing concerns with the standard of valuations in SSA particularly variations in valuations and their extent are largely based on anecdotal evidence. Unlike the developed world, such as the United Kingdom (UK), United States of America (USA) and Australia where a number of studies have been conducted into the extent of valuation errors, not much work has been done in this area in SSA.…”