CHAPTER ONE
1.0 INTRODUCTION
1.1 BACKGROUND TO THE STUDY
Rent, which is the most important term used tightly with a lease, has many definitions. According to Barlowe (1978), like general economics, land economics is concerned with the allocation of scarce resources. Another author, Leonard A. Satter observed that land economics is a social science that deals with those problems in which social condition is strategically affected by the physical location on property attributes of whole surface units. Likewise, rent according to Lean and Goodall in perspective of land economics and given definition that rent is the annual or periodic payment for use of land or building and fixing of the rent of property is largely influenced in practise by the evidence that can be seen by rent actually paid, not only for the property being valued but also for comparable properties in the same districts.
Rental value can be defined as an annual or periodic payment for the use of land and building or rental value is the net income which a property will produce or command in a specific location over a specific period of time. It is used by an Estate Surveyor and Valuer in property valuation. In this case, only a practical understanding of the working of real property market will enable Estate Surveyor and Valuer to carry out their function in a useful and dependable manner in serving their client.
There is at present insufficient data and information inspite of its importance as the backbone of property valuation in the country therefore, a study of rental value of residential property in Ekiti will supply some unavailable information. This research will look into the theoretical concepts of rental values and the method by which such value may be estimated.
This knowledge is essential arriving at a logical solution as to the highest and best use of property. The net income derived from a property is commonly referred to as net rental value. In determining the rental value of properties, evidence of rent which is paid in respect of property in the district provides the best guide to the values. Some knowledge of the factors are likely to influence rental values of residential property is therefore imperative. This is vital in understanding fluctuation in residential values of properties and advising on the reasonableness or otherwise of existing rent. This work will encourage and aid the development of a dependable residential property market thereby fostering national economic factor influence such values. Therefore, rental value can be defined as annual or periodic payment for the use of land and building. It is the income of land as a factor of production. Rent is usually payable annually and in advance. When the property on term which requires the landlord to bear the cost as a certain outgoing such as:
1) Repair and Rates: Such rent is termed as gross rent and said to be placed on fully inclusive term so as to arrive as net income. In such case, outgoings must be deducted from the gross rent paid.
Term Repair Repair
FIT 10% 5%
Outgoings whatever with exception of income tax which is general charge in all income tax whatsoever their source is known as net rent and it is based on FIT (Full Insurance Term)
Fully repairing External Internal Insurance Management rent estimation:
Term Repair Repair
FRI 3000 1500
This is also known as internal repairing and Insuring, IRI where the landlord only takes care of the external repair while all other outgoings are taken care of by the tenant.
Due to the shortage of housing as a result of the urban population growth in recent years, this has made a decline in the rate of new construction. The construction of housing is very difficult, time consuming and expensive with high interest rate of lendable fund from financial institution and the result is that enough housing is not being but much less as a past rate with all these reason. Landlord tends to increase rental value of their property at abnormal rate thereby making the low and middle income group to suffer. So many years ago, rent control policy was introduced to bring down the high level of rent but this has not yet solved the problem.
1.2 STATEMENT OF THE PROBLEM
When times are good and business is thriving, there will be demand for additional residential accommodation for new and expanding enterprises and increase in the money available. For new and improved residential accommodation, rental values of residential properties tend to rise in these circumstances. Conversely, when times are bad, trend in rental value of property tend to fall.
Change in fashion, status, social and general standard of living may greatly affect the demand for certain time of residential accommodations. Also, in the case of a factory, premises, new standard of factory registration a technical improvement in layout, design equipment of factory building may, cause many of this other buildings to become obsolete and so diminish the trend in rental value of residential properties. One of the most important factors which has already been affecting trend in rental value of resident property is limited. This does not mean that the supply of land and building is completely inelastic.
1.3 AIM AND OBJECTIVES
The aim of this study is to critically determine trend of rental value of residential properties in Ado- Ekiti.
The objectives to be pursued through the following:
- To compare the past and present rental value trends in Ado-Ekiti
- To examine other factors affecting trend in rental values of residential property in Ado-Ekiti.
- To recommend strategies that could be adopted to stem the continuous rise of rental values of residential properties
- To examine the effect of socio-economic factor on rental value of residential properties
1.4 SCOPE OF THE STUDY
The scope of this study covers the whole of Ado-Ekiti but it is limited to Odo-Adoso as to ascertain the trend of values of residential properties. It excludes the trend of rental values on commercial properties, industrial properties as well recreational properties. The scope will cover trend of rental values for the period of six years i.e. 2010-2016.
1.5 SIGNIFICANCE OF THE STUDY
The study is conceived in the view of the very high increase of rental accommodation and the inability of consumer to afford the payment of such high rents. The consequences of the above can be seen in the overcrowding rate and the rate of homelessness. It will help incoming students to learn more academically in viewing the study.
1.6 DEFINITION OF TERMS
Residential Property: They are used as dwelling accommodation. They can be let and sublet for rent. They may not be combined with shop and other types of property. The value of any residential property will depend on location, position and physical characteristics.
FLAT: A self-contain residential building which has living room, bedroom, store, kitchen, toilet, bathroom etc. on one floor.
DUPLEX: This is a category of residential property. Its possible to have a block of duplex and duplex bungalow.
MASSIONNETE: A massionnete is a part of a house left separately as a self-contained dwelling.
TENEMENT BUILDING: A tenement building is a residential property designed in such a way that letting of it on room basis to a number of separate occupier who store facility like kitchen, toilet and bathroom e.t.c is facilitated.
TERRACE BUNGALOW: A type of bungalow formed when a new bungalow is built close to it and it comprises of bedroom, dining room, living room, toilet, kitchen, store e.t.c and in some cases car park.
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