Impediments to foreign real estate investment in an emerging market. A tripartite characterisation of the Lagos, Nigeria property market
| DOI | https://doi.org/10.1108/JPIF-12-2017-0084 |
| Pages | 479-494 |
| Published date | 27 July 2018 |
| Date | 27 July 2018 |
| Author | Daramola Thompson Olapade,Timothy Oluwafemi Ayodele,Abel Olaleye |
| Subject Matter | Property valuation & finance,Property management & built environment,Real estate & property |
Impediments to foreign real estate
investment in an emerging market
A tripartite characterisation of the Lagos,
Nigeria property market
Daramola Thompson Olapade, Timothy Oluwafemi Ayodele and
Abel Olaleye
Department of Estate Management, Obafemi Awolowo University, Ile-Ife, Nigeria
Abstract
Purpose –The purpose of this paper is to examine the of characteristics of Lagos, Nigeria property market
and its submarkets on the prism of the market practitioners’characteristics, market transaction structure and
market maturity. This is done with a view to provide information capable of improving the flow of foreign
real estate investment to the Lagos property market.
Design/methodology/approach –Primary data were sourced through questionnaire administered on
firms of property practitioners in the market. A total of 190 firms were selected using the stratified random
sampling technique based on their geographical location. Descriptive statistics and Mann−Whitney U Test
were employed for data analysis.
Findings –The results showed that the Lagos property market was characterised by practitioners whose
highest level of education was majorly first degree, and with a mean computer literacy ranking of 3.38 on a
five-point Likert scale. Also, major transactions in the market included letting and sales. The market maturity
index of the market was 2.95 and therefore adjudged as an emerging market. The analysis also revealed that
there was no significant difference in the characteristics of the submarkets.
Practical implications –The resultsof the study are capableof enhancing investmentdecision in themarket.
Originality/value –The study differentiates itself from and adds to the previous studies on market
characteristics through an examination of the property market on the prism of the market transaction
structure, market practitioners’characteristics and maturity of the market holistically in the context of an
African emerging market.
Keywords Investor, Eme rging market, Lagos, Property market, For eign real estate investment,
Market maturity
Paper type Research paper
1. Introduction
There has been an increase in the mobility of international real estate investment across
national boundaries as a result of the prospect of higher return and strategic risk
reduction measure which such investment offers (Agboola, 2015). For instance, in 2013,
Ernst and Young reported that the foreign direct investment to Sub-Shara African real
estate, hospitality and construction sector increased by 63 per cent, thereby placing the
sector among the top five recipients of foreign real estate investment (FREI). Irrespective
of this increase, the level of FREI in the African market is very low when compared to that
of other regions in the world (Rothenberger, 2010). Meanwhile, it has been established that
the major factor driving the international market selection for FREI is the characteristics
of the real estate market such as the maturity of the market (Falkenbach, 2009). This is
because international investors required increased transparency of the market before
making any investment decision, and the lack of transparency is among the reasons why
many of the world’s emerging markets are excluded from consideration by international
investors (Gordon, 1999). The characteristics of a particular market can, therefore, be a
pointer to the level of FREI received. Suffice to say that international property companies
mainly invest in countries that have relative high scores in transparency (Eichholtz et al.,
2011).ThisisworrisomeforacountrylikeNigeria which ranks 83rd out of 109 markets
Journal of Property Investment &
Finance
Vol. 36 No. 5, 2018
pp. 479-494
© Emerald PublishingLimited
1463-578X
DOI 10.1108/JPIF-12-2017-0084
Received 14 December 2017
Revised 9 May 2018
Accepted 11 May 2018
The current issue and full text archive of this journal is available on Emerald Insight at:
www.emeraldinsight.com/1463-578X.htm
479
Impediments
to foreign
real estate
investment
covered in the biannual Global Real Estate Transparency Index (GRETI) for the year 2016
( Jones Lang LaSalle, 2016).
The concern for inf ormation on the characteri sticso f the realestate market is borne out
of the fact that each market has characteristics which differ between countries and regions
and between time periods (Agboola, 2015). The uniqueness of property market and
differences in characteristics across varying geographical locations has led researchers
over the world to investigate the characteristics of proper ty markets. Such e fforts to
provide an empirical framework for the examination of characteristics and classification
of property market reveal three major approaches. The first approach examines
the characteristics of market practitioners (Olaleye, 2004, 2008), the second focusses on the
market structure (Henneberry, 1996; Alhashimi and Dwyer, 2004; Arvanitidis, 2006;
Butler, 2009; Odebode and Olaleye, 2010), while the third analyses the market maturity
(Keogh and D’Arcy, 1994; Chin et al., 2006; Dugeri, 2011). Characteristic of practitioners
relates to the socio-economic background of market practitioners such as educational
background, professional qualification, experience, computer literacy, amongst others.
The market transaction structure, on the other hand, relates to the analysis of the market
in term of types of property transactions that take place in the market, the frequency of
market transactions and the mode of payment prevalent in the market. Finally, the market
maturity relates to the extent to which the property market attains/performs with respect
to a set of criteria comprising quality real estate products offered; pool of skilled property
professionals available; information flow and research activity; market openness; and
standardisation of property rights and market practices (Keogh and D’Arcy, 1994;
Armitage, 1996, Chin et al., 2006; Dugeri, 2011).
Previous researchers have thus considered aspects of the property market
characteristics using only one of the two methodologies identified above with none
considering the characteristics holistically together in a single study. Each of the
approaches provides interrelated information about the characteristics of the property
market; however, the information provided by the separate approaches might not be
adequate to furnish an international investor on the outlook of a referenced property
market. In addition, most of the extant studies are dated and their findings might not
be applicable to prevailing economic circumstances obtainable in the Lagos
property market. It is in this regard that this paper examined the characteristics of
property market of an emerging African market with a focus on Lagos, Nigeria property
market. This was done with a view to provide information on the characteristics of the
submarkets that could improve the flow of FREI to the Lagos property market, which
occupies a major niche in the Nigerian real estate market. The study differentiates itself
from and adds to the previous studies on market characteristics through an examination
of the property market on the prism of the market practitioners ‘characteristics,
market transaction structure and maturity of the market holistically in the context of an
African emerging market.
1.1 The lagos property market
Lagos is one of the 36 states in Nigeria. Although it is the smallest in terms of the landmass,
it is the largest urban area with an annual urban growth rate of 8.6 per cent. It is located at
the southwestern part of Nigeria on the narrow coastal flood plain of the blight of Benin on
the west coast of Africa. It lies approximately between longitude 2
0
42’E and 3
0
22’E and
latitude 6
0
22’N and 6
0
24’N (Nwanna, 2012). Lagos is made up of two parts, the Island and
the Mainland. The Island is separated from the Mainland by the main channel draining
the lagoon into the Atlantic. The Island comprises places like Isale Eko, Obalende, Ikoyi,
Victoria Island, Ajah, while the Mainland includes locations such as Iddo, Oyingbo, Yaba,
Ebute Metta, Agege, Ikeja, Alausa, Ipaja (Akinyele, 2009).
480
JPIF
36,5
To continue reading
Request your trial