EMPIRICAL INVESTIGATION OF THE EFFECT OF PLANNING REGULATIONS ON COMMERCIAL PROPERTY VALUES IN VICTORIA ISLAND AND IKEJA, LAGOS STATE


Content

ABSTRACT

 The essence of town planning  regulations in urban centres is to ensure that activities are organised and developed in physical space with due consideration for protection of public interest which includes health, safety, convenience, efficiency, energy conservation, environmental quality, social equity, social choice and amenity. The planning regulations are the various town planning framework (technical and legal) put in place which are to be strictly adhered to in order to achieve the goals of orderly development within the society. The study therefore examined the effects of planning regulations and identified issues that could be resolved to enhance commercial property values in metropolitan Lagos using Ikeja and Victoria Island as case study. Respondents were Estate Surveyors and Valuers practising in Ikeja and Victoria Island areas of the metropolis. A total of one hundred and ten (110) structured questionnaires were administered on the respondents. Data collected were analyzed using frequency count and percentages, mean and standard deviation, Pearson’s correlation and linear regression. The study revealed that there was a significant relationship between planning regulations and commercial property values. It also revealed that there was a significant difference in the individual effect of various planning regulations on commercial property values as development control, zoning, setback/ air space, plot coverage and parking requirement that affected property values in the outlined descending order. It is therefore recommended that government should ensure proper land use planning and that people should be made to comply with all statutory regulations. There is also the need for the proper coordination of all government agencies responsible for land use activities.

 

 

 

                                                       

 

 

 

 

 

TABLE OF CONTENTS

Title page                                                                                                                                       i

Certification                                                                                                                                   ii

Dedication                                                                                                                                     iii

Acknowledgements                                                                                                                       iv

Table of Contents                                                                                                                          v

List of Tables                                                                                                                                 vii

List of Figures                                                                                                                               ix

Abstract                                                                                                                                         x        

CHAPTER ONE: GENERAL INTRODUCTION

1.1 Background of the Study                                                                                                       1

1.2 Statement of Problem                                                                                                             3

1.3 Research Questions                                                                                                                 5

1.4 Aim and Objectives                                                                                                                5

1.5 Research Hypothesis                                                                                                               6

1.6 Significance of the Study                                                                                                       6

1.7 Scope of the Study                                                                                                                 7

1.8 Limitations of the Study                                                                                                        9

1.9 The Study Area                                                                                                                      9

CHAPTER TWO: LITERATURE REVIEW

2.1 Introduction                                                                                                                          12

2.2   Town Planning                                                                                                                    12

2.2.1 Town Planning Ordinances Experience in Nigeria                                                            15

2.2.2 The Land Use Act (Cap. 202 of the laws of Nigeria 1978) and physical planning           19

2.2.3 The 1978 Land Use Act and Land-use planning in Nigeria                                              20

2.2.4 Urban and Regional Planning Act of 1992 and Commercial Properties                           21

2.3    Planning Regulations                                                                                                         24

2.4 Planning Regulations that Affects Commercial Property Values                                         25

2.5 Tools of Development Control                                                                                             33

2.6 Effects of Planning Regulations on Property Values                                                           41

2.7 Concept of Property and Property Values                                                                           43

2.8 Determinants of Property Values                                                                                         45

CHAPTER THREE: RESEARCH METHODS

3.0 Introduction                                                                                                                         50

3.1 Research Design                                                                                                                   50

3.2 Method of Data Collection                                                                                                  51

3.3 Sample Frame                                                                                                                      51

3.4 Sample Size                                                                                                                         51

3.5 Sampling Techniques and Procedure                                                                                  52

3.6 Research Instrument                                                                                                            52

3.6 Analytical Techniques                                                                                                         53

CHAPTER FOUR:  DATA ANALYSIS AND FINDINGS

4.0 Introduction                                                                                                                         54

4.1 Socio-economic Status of Respondents                                                                              54

4.2 Types of Planning Regulation that Affects Commercial Activities                                    57

4.3: Effect of Planning Regulations on Commercial Property Values                                     58

4.4 Importance of Planning Regulations to Commercial Property Values in the Study Area  62

4.5 Hypothesis Testing                                                                                                              63

 

CHAPTER FIVE: SUMMARY OF FINDINGS, RECOMMENDATIONS AND CONCLUSION

5.1 Introduction                                                                                                                        68

5.2 Summary of Findings                                                                                                          68

5.3 Recommendations                                                                                                               70

5.4 Conclusion                                                                                                                           71

REFERENCES

APPENDIX

(Questionnaires to Estate Surveyors and Valuers)

 

 

 

 

 

 

 

 

 

 

 

LISTS OF TABLES

 

Table                                                                                                                                           Page

Table 3.1 Sample Size of the Study Area                                                                                      52

Table 4.2.1. Gender of Respondents                                                                                              54

 

Table 4.2.2 Professional Qualification of Respondents                                                                 55

Table4.2.3Highest Educational Qualification of Respondents                                                      55

Table 4.2.4 Post Qualification Work Experience of Respondents                                                56

Table 4.2.5 Types of Planning Regulations that Affects Commercial Property Values in Lagos Metropolis                                                                                                                                      57

Table4.2.6 Effects of Planning Regulations on Commercial Property Values                              58

Table4.2.7: Rental Values of Commercial Properties at Ikeja                                                      59

Table 4.2.8: Rental Values of Commercial Properties at Victoria Island                                     60

Table 4.2.9 Factors Influencing Rental Values of Commercial Properties in the Study Area      60

 

Table 4.2.10: Importance of Planning Regulations on Commercial Property Values in the Study Area                                                                                                                                                62

Table4.3.1 Planning Regulations and Commercial Property Values                                             63

Table 4.3.2: Model Summary                                                                                                        64

 

 

LIST OF FIGURES

FIGURE                                                                                                                                PAGE

Fig 1.1: Map of Metropolitan Lagos                                                                                             11

Fig 2: Factors Determining Property Values                                                                                47

 

 

 

 

 

 

CHAPTER ONE

1.0  INTRODUCTION

1.1 Background of the Study

Various authorities and scholars (Sukuran & Ho, 2008; Owei et al., 2010; Nnah et al., 2007) have given different definitions of town and physical planning. According to Sukuran and Ho (2008), town planning system is principally a system of preventive control of various land uses patterns where the controlling authority would not allow any approval for development activity if adverse impact on surrounding environment was visualized. Town planning can be seen as a means of increasing the values of private and profitable uses of land. Yet fragmented and multiple private interests in land restrict private owners from altering radically or enhancing the overall  pattern of use, and multiple ownership simultaneously retards the transfer of  land to more profitable users and inhibits large –scale development. Therefore, in this context, town planning can be seen both as means of establishing complementarity of  land uses while keeping conflicting uses apart through such devices as zoning, and as a means of speeding up the transfer of land between uses. By creating a climate of greater certainty; the zoning and density control aspects of town planning eliminate some of the imperfections of the property market, and enable land to move more readily to its highest and best use (Balchin, et al., 1995)

 

Owei et al. (2010) described physical planning as a process aimed at achieving orderly physical development with the overall aim of evolving a functional and live-able environment where individual and common goals can be achieved. The above definitions infer that planning is aimed at helping the society achieve various beneficial goals. Planning is regarded as a mechanism for the government to exercise its control on the urban development process.

 In Nigeria, Town Planning is interpreted in section 18 of the Town Planners Registration Council Decree No. 3 of 1988 (TOPREC), as the theory and practice of town and country planning by the ordering and control of the citing and erection of buildings and other structures and the provision of open spaces and such similar use of land, as the case may be, for the improvement of the human environment. Essentially, town planning is concerned with the spatial ordering of land use both in the urban and rural settings for the purpose of creating functionally efficient and aesthetically pleasing environment for living, working, circulation and recreation. For any system to work as expected there is always the need for control and, balance which is a form of regulation for necessary operation. According to Nnah et al. (2007), Planning seeks to guide the way our towns, cities and countryside develop.  This includes the use of land & buildings, the appearance of buildings, landscaping considerations, highway access and the impact that the development will have on the general environment.

Regulations are enforced as part of the planning strategy ‘to conserve and promote public health, safety convenience, and general welfare of the people and to provide for the future growth and improvement of the area’ (Booth, 2007).  The planning regulations are the various town planning framework (technical and legal) put in place which are to be strictly adhered to in order to achieve the goals of orderly development within the society.  To this end, it is the systematic assessment of land and water potential, alternatives for land use, and economic and social conditions in order to select and adopt the best land-use options. (Young, 1993).

As mentioned by Dale and Mclaughlin (1999), there are two basic approaches to regulating how land is developed and used. This can be by way of Legislation applying to all properties uniformly: This includes a wide variety of rules governing the physical location of economic activities within jurisdictions; regulations governing the design, height, or capital intensity of commercial and industrial property and a permit system in which a property owner must make application at the time of a proposed development. Considering commercial property in Lagos metropolis, a commercial property is a bundle of goods. It refers to buildings or land intended to generate a profit, either from capital gain or rental income. Commercial property includes office buildings, industrial properties, hotels, malls, retail stores, warehouses, farm land and garages.

As it is being experienced in Lagos metropolis, most areas are changing residential property to commercial use largely because they command high rental value and a property owner is always inclined to that use that will command highest and best value (Osagie et al., 2012). Various reasons have been given for this, part of which includes town planning regulation. It is against this background that this research examines the effectiveness of planning regulation in relation to commercial property values in the Lagos Metropolis to determine the effects that adherence to planning regulation has on commercial properties.

 

1.2. Statement of Problem

Jaeger (2006) asserted that planning regulations could affect the market value of a property in a variety of ways. He also noted that while some of the effects might be straightforward; in most cases they are complex and can easily be misunderstood or misinterpreted. In correlation with the above assertion, it has been observed that different people have different perspectives about the level of positivity or negativity of planning regulations as regards commercial properties. For instance, when a regulation restricts the use of a particular commercial property due to strict adherence to zoning regulations, which is meant to control haphazard development in the city, such a plan may end up increasing the economic value of the property especially in the Central Business Districts (CBDs).

 In such a situation, the demand for commercial properties exceeds the supply in the vantage area and will resultantly inflate the value of such properties. This will have positive effects on the commercial property owners but can be seen in a negative manner by the end users of properties in such an area due to high rental values.            

Further discussing likely problems that may arise from planning regulations, Jaeger (2006) stated that land-use regulations could cause a reduction in property value where the supply of land for an allowed use was higher than it would have been without the land-use regulation, while additional supply could cause a drop in the market price due to downward sloping demand. Thus the major problem of haphazard development in some planning regulation is that of abnormally high property values in some areas while lowering value in other areas. It is of pertinent that more studies are carried out to identify planning regulations that affect commercial property value for equal benefit of owner and tenants of the properties. Data on these issues are lacking and hence, this study is necessary to identify types of planning regulations affecting commercial property values in the Lagos metropolis. This study will resolve the following research questions.

 

 

 

 

 

 

1.3   Research Questions

This study focuses on the effect or impact of planning regulations on commercial property values in metropolitan Lagos. Some pertinent questions to enable the study attain its stated objectives are as follows:

1.      What are the types of planning regulations that affect commercial property values in the study area?

2.      Is there any relationship between planning regulations and commercial property values?

3.      What are the effects of planning regulations on commercial property values in the study area?

4.      What is the relative importance of various planning regulations on commercial property values?

1.4  Aim and Objectives

The aim of this research is to determine the effects of planning regulations on commercial property values in metropolitan Lagos. The objectives are to:    

a.       To identify the types of planning regulations that affect commercial property values in the study area.

b.      To investigate the relationship between planning regulations and commercial property values

c.       To evaluate the effects of these planning regulations on commercial property values in the study area.

d.      To analyze the relative importance of various planning regulations on commercial property values in the study area.

1.5   Research Hypothesis

Hypothesis 1

There is no significant relationship between planning regulations and commercial property values in Lagos metropolis. 

Hypothesis 2

There is no significant difference in the individual effects of various planning regulations on commercial property values

1.6 Significance of the Study

Various studies have been conducted on the effects of planning regulations on property values.

According to Jaeger (2006), the planning system can have a significant impact on land values.  He stated that for example, in the United Kingdom, a piece of property can be worth a few thousand pounds before the grant of permission and millions afterwards. Land-use regulations in one part of a city may cause downward value changes, but at the same time may increase the value of land in another locality where the regulations do permit development. Property owners tend to assume that if only planning regulations did not stand in their way, a lucrative type of development would “land” on their own plot of land (Moore, 2005).

 Ajibola et al. (2011) examined the relationship between urban planning and residential property values in some selected neighbourhoods within Agege Local Government council area of Lagos metropolis. He found out that there is significant level of difference in residential property values between the planned and unplanned residential areas. It has been assumed that land-use regulations invariably reduce property values when, in fact, they often have positive effects (Jaeger, 2006).

It has also been observed that the relationship between land use regulations and property values has been the focus of many studies neglecting planning a service that provides a scheme that facilitate physical development in an urban area. Grout, Jaeger, and Plantinga (2009) examined how Oregon’s land use planning system affects land prices in the Portland metro area. Since Oregon’s land regulations are intended to guide and control the location of development rather than to limit the supply of developable land, they should not produce scarcity-induced price increases. Using data on land values for vacant parcels in and around the Portland Urban Growth Boundary (UGB), they employ a regression discontinuity design. The researchers concluded that, Oregon’s landmark land use planning system was designed to influence the location of development, but not to constrain the amount of development.

 According to Jeager and Plantiga (2007) when a land use regulation disallows or restricts a particular type of development or use of a property. If the restricted use of the property would yield higher profits to the landowner than its current use, the regulation would decrease the value of the property. If a property is essentially not feasible to develop then no decrease in value would result from a regulation that restricts development (Jeager and Plantiga, 2007).

This study is vital as a means of assisting planners to have a full understanding of the market implications and as a means of plugging the gaps in academic research on the subject. It will also help government agencies in determining more fairly appropriate charges and taxes to levy in order to recapture value increments in commercial property arising from planning regulations.

1.7                          Scope of the Study

The study focused on commercial properties in Metropolitan Lagos. Due to the magnitude, terrain and complex nature of Lagos State, the study was limited to Ikeja and Victoria Isalnd. Reason for this is that most estate surveyors and valuers are predominant in Ikeja and Victoria Island which itself are part of four zones identified within the larger Lagos metropolis. The four zones (Lagos Island, Apapa, Lagos Mainland, and Ikeja) represent commercial hubs of Lagos metropolis. Other studies reveal that there are five types of commercial properties in the study area. Viz, retail shop premises, banking spaces, office properties ware house and non-specific commercial properties.

This research, however, focused on offices, shops, banking spaces, and other types of commercial uses in the study area to the exclusion of residential, industrial, and non-specific type of commercial properties. Some factors have dictated the choice of Victoria island and ikeja. Firstly, the property market in the study area is well developed and it is possible to identify and analyze variations. Comprehensive data are available on commercial property values in the study area which is one of the few cities in Nigeria offering opportunity for comprehensive survey of its commercial properties, with enlightened occupiers of commercial premises thereby making data collection possible. Secondly, a number of property magazines are in circulation in the city where estate surveyors and valuers advertise commercial properties available for sale or letting. This makes the property market very active and up-to-date with stakeholders, prospective tenants, property owners, and investors versatile and having a good knowledge about the goings-on in the market.

Data on the values of commercial properties in Lagos metropolis would be gathered from practicing estate surveyors and valuers that operate in Victoria Island and Ikeja because large numbers of registered firms have their offices located in these locations and they also serve as the commercial hub in Lagos metropolis. According to NIESV (2014), more than fifty (50) percent of estate surveyors and valuers have their offices in the Lagos metropolis indicating that Lagos state has the highest population of practicing estate surveyors and valuers in Nigeria. This serves as a basis for choosing Lagos based practitioners as the study population.

 

1.8       Limitations of the Study

The study focused on the effects of planning regulations on commercial property values in Lagos metropolis. The study therefore analyzed the effects of planning regulations especially development control, building regulations, zoning, height restrictions and fencing on commercial property values in Victoria Island and Ikeja. The data were gathered through personal observation and opinions of Estate Surveyors and Valuers practicing in the study area  as elicited through the use of a structured questionnaire. The accuracy, or otherwise, of such opinions although not in doubt was not investigated. Apart from these, some challenges were encountered during the study. By virtue of the busy nature of estate surveying and valuation practitioners there was considerable reluctance on their part to volunteer information. Some of the respondents estate surveyors and valuers, delayed in completing the questionnaires and it took personal influence of the researcher (as their colleague) to obtain their eventual impressive responses. These limitations however neither affected the quality of data collected nor the conclusions drawn from it.

 

1.9 The Study Area                                                                                             

The study is limited to metropolitan Lagos which is home to many companies and industries.  The city is located in the south-western part of Nigeria. The city of Lagos was under the Lagos City Council. The regions of Ikeja, Agege, Mushin, Ikorodu were under the former Western Region. According to Oni (2001), the boundaries of metropolitan Lagos as consisting of the territory within Latitudes 6°34′60″N and Longitude 3°19′59″E along the West African coast. Lagos was the capital city of the country before it was replaced with Abuja on 12th December, 1991. However, Lagos remains the commercial nerve centre of Nigeria as more than half of Nigeria’s industrial capacity is located there. It is the largest metropolitan area in Nigeria (Ayeni, 1979). Lagos State is made up of twenty local government council areas out of which sixteen form the metropolitan Lagos. 

The state is the smallest state in Nigeria in land area with an area of about 358,861 hectares or 3577sq.km (Odumosu, 1999). This represents only 0.4 percent of the entire area of the country.  Lagos metropolis lies generally on low lands, with about 17500 hectares of built-up area. The population growth rate of Lagos has serious implications on the trend of urban land use and development. This has serious consequences on land use planning in the state especially in urban areas. The city is a typical example in the history of growth and development of urban areas in Nigeria. This has dictated the choice of Lagos metropolis to know the planning regulations that are in place and to also know their effects on commercial property value

 

 

Fig 1.1: Map of Metropolitan Lagos


Source: Department of Surveying and Geoinfomatics, University of Lagos (2014)





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