THE RELATIONSHIP BETWEEN RISING COST OF BUILDING MATERIALS AND RENTAL VALUE OF RESIDENTIAL PROPERTIES

THE RELATIONSHIP BETWEEN RISING COST OF BUILDING MATERIALS AND RENTAL VALUE OF RESIDENTIAL PROPERTIES

ABSTRACT

High prices of building materials had form a crucial constraint to improving construction procurement in Nigeria. The influence of the macro-economic indicators on this problem cannot be ruled out. This study therefore investigates the relationship rising cost of building materials and rental value of residential properties. Questionnaires were administered to respondents which included the Architects, Quantity Surveyors, Builders, Engineers, Bankers/Economist. The study established that inflation, exchange rate, import, interest rate, money supply and demand for money have a significant effect on the prices of building materials. Demand for import, inflation rate, government economic policies, level of foreign currency demand and level of foreign currency supplied were identified as causing a change in exchange rate while factors affecting inflation rate were variation in the value of the naira, demand for goods, changes in real incomes lending interest and import tariffs. On the other hand, factors causing a change in interest rate were government economic policies, demand for money, inflation rate, deregulation of interest rate. It was found that a high relationship existed between exchange rate, inflation rate and interest rate and the prices of building materials. The study recommended reduction in import duties, bringing exchange rate to the barest minimum, reduction in interest rate on banks loans while government should maintain stable inflationary trend.

CHAPTER ONE

1.0        INTRODUCTION

1.1     BACKGROUND OF THE STUDY

Building materials cannot be precisely defined, but it covers a wide range of materials basically used in the building construction industry, these materials vary from their natural state to those partially or completely processed in the manufacturing industries. Therefore, building materials include aggregate, bricks, timber, ceiling, cement, paint, doors, Windows, roofing sheets, iron and steel product, sanitary waves, electrical fittings etc. Building materials include material components used in building industry.

The fluctuations in the cost of building materials have a pronounce effects on property investment rental value in Nigerian society. The changes could be attributed to a number of factors such as government policies, that is, effect on modern technology which necessitated the development and use of new materials and quicker methods, changes in tastes of client due to need for better housing, high professional service charge etc. These factors continue to present themselves and if they are ignored as it is the case now they will continue to pose problems on the generality of the populace because of the psychological, social and economic effects on the property value in whatever form, be it residential, commercial or industrial. Shelter is a basic necessity in life. an individual can satisfy this need by either occupying his own comers occupier property or rent another person property. In our traditional society the need for shelter this mainly met through the first alternative that is owner occupation with emergency of urban centers, the situation has changed. Many people are no longer about to own property because of the difficult in the acquisition of land and the high cost of building construction. There fore, the are left with the alternative of renting other peoples, property in order to satisfy their need foe shelter. Consequently two class of urban resident have emerged. The landlord a certain amount of money in consideration for his use of the land lords to house. This amount is popularly known as rent.

The post-civil was period witnessed an unprecedented number of rural population trooping into the urban to centre due to the conspicuous property brought about in urban are by the oil boom. This result to high demand for the existing limited supply of landed propertied. Consequent upon these rent for landed properties increased considerably.

This trend has continued with the effect that the average worker is paying 30% to 40% of his salary as rent. The increase in rents on the properties has led to the variation of rent on the properties. In urban area due to location advantage (for example location) which some properties offer above other for residential uses, rent tend to very on account of the type of use which a property can offer. (The project is aimed at assessing the relationship between the cost of building materials and residential property rental value and at the end of the findings, possible control measures shall be proposed as recommendations).

1.2     STATEMENT OF THE PROBLEM

This research looks at the relationship between the rising cost of building materials and residential property rental value in Nasarawa, Nasarawa State. The most basic problem is that when the cost of  building materials at times go up and the cost of houses go as well, even it is by one kobo that building materials go up, it affects the whole cost and scale of development. When the cost of developing a residential house is high as a result of high cost of building materials, the effect of this is felt in the rental values of such a property.

1.3     AIM AND OBJECTIVES

The aim of this work is to examine the relationship between the rising cost of building materials and residential property rental values in Nasarawa.

To achieve this aim, the following objectives were looked into:

1. To examine the trends of the prices of building materials from 2006 – 2015.
2. To examine the trends in residential property rental values from 2006 – 2015.
3. To assess the relationship between the rising cost of building materials and residential proper rental values in the same period.
4. To identify problems associated with this relationship.
5. To suggest possible solutions to the identified problems.

1.4     RESEARCH QUESTION

This research work tends to address some fundamental questions, which are as follows:

1. What is the trends of price of building materials from (2006-2015)
2. What is the trends in residential property rental value from (2006-2015)
3. What is the relationship between rising cost of building materials and residential property rental value in the same period?
4. What are the problems associated with this relationship.
5. What is the suggest possible solution to the identified problem.

1.6     SIGNIFICANCE OF THE STUDY

This research will help to establish the relationship between the rising cost of building materials and residential rental values in Nasarawa. It will also serve as reference materials to students carrying out research on similar topics.It will also afford the government the opportunity to know the areas to tackle in the rising cost of building materials so as to reduce the problem being faced by residents in tenants in the study area. Lastly, it will also be of relevance to developers who desire to invest in housing.

1.7     SCOPE AND LIMITATIONS

The scope of this research covers a period of ten years (2006-2015) and it is restricted to rising cost of building material and residential property rental values in Nasarawa town.

Some obstacles encountered in the course of carrying out this research were as follow:

• Time factor was the major constrain couple with multiplicity of other classroom work and lecture requirements.
• Un-cooperating attitude of some respondents as they were busy to attend to the researcher.
• In-accessibility of adequate information from respondent due to illiteracy among them, some find it difficult to understand some question they were asked.
• Finance was also a limiting factor in the course of the research.

1.      DEFINITION OF OPERATIONAL TERMS
2. Cost: Oxford Advance Learner’s Dictionary (6th edition) define cost as the amount of money that you need in order to buy, make or do something.
3. Building: a structure with a roof and walls such as a house, school, store, or factory.
4. Materials: a matter from which a thing is or can be made.
5. Building Materials: this is any material which is used for construction purposes.
6. Property: a thing or things belonging to someone; possessions collectively.
7. Residential: an area primarily used for housing.
8. Value: This a monetary worth of an asset, business entity, goods sold, service rendered, or liability.
9. Rental Value: Oxford Advance Learner’s Dictionary (6th edition) define is the fair market value of a property.

1.8     HISTORICAL BACKGROUND OF THE STUDY AREA

NASARAWA TOWN

Nasarawa Emirate in Nasarawa State is located in the Central region of Nigeria. It is flanked by Keffi and the Federal Capital to the North. To the South, it is bounded by Benue River and to the west, it bordered the present Gadabuka and Toto Local government area which are of course, part of the Emirate. To the East, it is bordered by Doma, Lafia and Keana Local Government Areas all of Nasarawa State.

The founding of Nasarawa Emirate in 1835 AD was the consequence of palace tussle that arose in Keffi between Umani Makama Dogo then Madaki of Keffi and Jibrilu, son of Abdu Zanga (first Emir of Keffi).

Umaru later known as Makama Dogo was born in 1958 at Ruma village in Katsina Emirate, his father was Usman Kabawana and his mother Amina. Umaru migrated to Zana , having lost his parent where he =-stayed with Emir Musa, he was accorded recognition by Shehu Usman Danfodio, among the jihadists that captured Zana under Musa.

After receiving the flag from Danfodio, Emir Musa sent Umaru Southward of Zana to spread the Islamic faith, Umaru arrived at a place called Zana near thepresent Nasarawa region. He met Abdu Zanga a Fulani normad from Katsina, they both became very close that Umaru adviced them to present themselves to the Emir of Zana for recognition, this was done successfully, which triggered the granting of a request of Abdu Zanga by the then Emir of Zana to settle in a place called Keffi which was ruled by Abdu Zanga since he was the eldest with Gunki, his Madaki and Umaru as Makama.

In 1802, Keffi was famous for the exploits of the great warrior Umaru and with Abdu Zanga. A misunderstanding between Abdu Zanga and Makadi Gunki later made the duo paeted ways.

On the sickbed of Abdu Zanga,  he gathered his brothers and sons and told them to appoint Umaru Makama Dogo as the Emir of Keffi which was never realized after the death of Zanga  due to the betrayal to one Albarka. However , Makama Dogo was advised to move Westward of Keffi where the Kwato (Igbira) resides, fought then and established his own kingdom but he kicked against the idea and moved Yankardi, where he camped about ten kilometer South of Keffi.

Makama left his sons Ahmadu Manman Galadima and Manman Sani in Keffi as a flash back. He later left Yankardi where he arrived at a place occupied by Bassa speaking people called TAMMAH, met Bagobiri known as Kasimau, who assisted him in the establishment of a kingdom called Nasarawa (meaning victorious). Makama Dogo fought many wars in the course of his Islamization, fought Afo speaking people, conquered Ubbe, Usheni, Agwadama, Itta and Gwaffa.

Makama Dogo also conquered Panda due to some misunderstandind between him and Ohimege (the ruler of Panda). Makama Dogo fought the people of Toto (Igbira people) because of the combination of Islam and traditional way of worship by the people. After fighting other kingdoms like Dogo, Agaza and Udeni, Umaru told Madaki Ahmadu his eldest son to continue leadership after his death and should please be buried in Nasarawa town.

PHYSICAL CHARACTERISTICS

The major things considered under physical characteristics of Nasarawa are, geographical location, temperature, rainfall, geology, wind, vegetation, humidity, soil.    

TEMPERATURE

The temperatures are generally high during the day, particularly between the months of March and April. The main monthly temperatures in the state range between 20⁰C and 34⁰C with the hottest months being March/April and the coolest months being December/January.

RAINFALL

The study area experience dry season without or little’s rainfall from November to March of about 95mm, which is wet season is from April to October of about 1.30mm,

GEOLOGY

From the Jos Plateau, this comprises of basement complex metamorphic rocks, granite and basalt of two or more ages. The basement complex is covered by shadow soil.

WIND

Nasarawa local government is determined by the seasonal movement on inter-tropical convergence zone [ITCZ], which represents the moving frontier between the moist Atlantic air from the south and the dry air from the north. In the dry season from November till March the north east wind are dominant. For the remaining of the year, the south-western winds are prevailing. Generally, the wind velocity is relatively low.

VEGETATION

Nasarawa is situated in the Benue valley between the Benue river and Jos Plateau. This area lies within the part of southern guinea savannah. The vegetation of Nasarawa has, to a large extent resulted from extensive agricultural use of the land, the predominant vegetation type is partly savannah which is characterized by a discontinuous canopy, shrubs and grasses many areas are affected by man through bush burning during the dry season. Among the common trees are oil bean trees, locust bean free and isoberline trees.

RELATIVE HUMIDITY

The relative humidity is the measurement of deepness of the atmosphere which varies from place to place and different time of the day. The level of humidity in Nasarawa state in January is quite less that 40% which rises as from February to July to about 88%. By April when the steady rain commences it will be about 75% by August when the inter-tropical discontinuity is at it northern part, must position of the entire state will experience tropical marine wind and continues till December.   

SOIL

The major soil units of Nasarawa belong to the category of oxisols or tropical ferruginous soils. The soils are derived mainly from the basement complex and old sedimentary rocks. Lateritic crust occurs in extensive areas on the plains while hydro orphic soils (limbic incept sols) occur along the flood plains of major rivers (Nyangba, 1995).

SOCIO-ECONOMIC CHARACTERISTICS

Nasarawa main economic activity is agriculture; cash crop, such as yam, cassava and egusi (melon). Production of minerals such as salt is also another main economic activity of people in the state; Nasarawa produces a large proportion of the salt consumed in the country.