Academic journal article Journal of Emerging Trends in Economics and Management Sciences

An Evaluation of the Appropriateness of the Investment Method of Valuation for Residential Properties in Lagos

Academic journal article Journal of Emerging Trends in Economics and Management Sciences

An Evaluation of the Appropriateness of the Investment Method of Valuation for Residential Properties in Lagos

Article excerpt


The purpose of the study is to determine the appropriateness of the investment method of valuation for residential properties in Lagos, Nigeria. The study is exploratory while the research design includes the use of questionnaire and personal interview designed to elicit information from practising Estate Surveyors and Valuers in Lagos. The study hypothesized that the investment method is not appropriate for the valuation of residential property in Lagos metropolis. Study revealed that the investment method was appropriate although not singly used by the Nigerian surveyors to determine final value. The hybrid method was generally used because of paucity of data, lack of total confidence on the investment method as well as ignorance of most Estate Surveyors on the various investment methods. The study recommends that the Nigerian Institution of Estate Surveyors and Valuers and the Estate Surveyors and Valuers Registration Board of Nigeria (ESVARBON) should organise a mandatory educational enlightenment programmes/annual conference on paradigm shifts on the investment method of valuation. The study also supports the call for establishment of data bank while it suggests the creation of a faculty by the Nigerian Institution of Estate Surveyors and Valuers for this purpose or alternatively a grant may be provided for research in the Nigerian universities on sustaining data bank in the estate profession.

Keywords: appropriateness, assessment, investment method, residential properties, Lagos


The estate profession began in Nigeria in 1969 when some few foreign trained Estate Surveyors gathered together to form the Nigerian Institution of Estate Surveyors and Valuers. In 1975, Decree 24 was enacted by the government to give the profession a legal backing. The Estate Surveyors perform other duties apart from valuation. The process for determining the value of the investment properties entails capitalising the net rental income having carefully deducted all outgoings from the gross rent (Kuye, 2009, Ajayi, 2010). Kuye observed that "in developing economies such as Nigeria, the market valuation of investment properties does not appear intricate as obtained in advanced countries like the UK where several legislations constitute a predominant factor normally applied in valuing investment properties"

In United Kingdom, the process Valuers go through in determining the value of properties involves the use of econometric models, skill and judgement of worth (often a prediction of the most likely selling price of a property. In Nigeria, it has been generally observed by scholars that the market value has not been similar with price. Valuers have been free to use their personal judgement as much as possible to determine Value. The accuracy of the result ultimately depends on their skill, experience and good judgement. Appropriate valuation method must be selected by Valuers to arrive at a value that will meet client's requirement. Also, it has been generally noted that client's perception of value is different from the estate surveyors and valuers. It is therefore important that the appraiser must take cognisance of this while carrying out his duties otherwise the essence of the exercise will be defeated. The appraisal process is a systematic, logical method of collecting, analysing and processing data into intelligent well reasoned value estimates (IAAO). The valuer must follow step by step all the process required in valuation. However, the simplistic manner at which valuation is done using the conventional investment method seems to affect the values turned out by the valuers in developing countries. Studies have also confirmed that values arrived by different Estate Surveyors and Valuers have often been different from one another. Their figures have been seen as the basis why other professionals doubt the validity of the valuation methods.

The purpose of income property valuation is to duplicate the behaviour of average investors (Ajayi, 2010). …

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