Modelling apartments values in the Nairobi metropolitan area, Kenya

Abstract

PurposeThe purpose of this paper is to determine the most significant factors influencing apartment values in Nairobi Metropolitan Area (NMA), Kenya and develop a valuation model using the identified variables. The paper is thus promoting the adoption of advanced, more reliable and accurate valuation methods in developing economies such as Kenya. Therefore, the paper demonstrates the potential of the hedonic pricing method (HPM) in property valuation by making objective adjustments to comparable sales data.Design/methodology/approachThe paper utilizes a case study design by analysing recent (January 2020 to December 2021) apartment sales and apartment attributes in NMA. A sample size of 264 transactions was analysed using the HPM.FindingsThe study identified six significant factors affecting apartment values in the study area: apartment size, location, floor finishes, provision of shopping facilities, swimming pool and gym. A valuation model has been developed using the six variables.Research limitations/implicationsThe paper is contributing to the ongoing global debate on the accuracy, reliability and validity of property valuations with particular emphasis on the developing economies to adopt the more accurate, efficient and reliable valuation approaches.Practical implicationsThe findings are useful to property valuers and estate managers in determining the most statistically significant attributes affecting apartment values in the NMA hence enabling them to offer informed professional advice. However, the findings of the study are limited to the study area since real estate is heterogeneous.Social implicationsProperty investors, financiers and other stakeholders in the society will benefit from the findings of this study in their decision-making process. Additionally, wide adoption of the more reliable and accurate valuation approaches would foster public confidence in valuation and estate management professional services leading to enhanced consumption of these services by the society and promoting public care.Originality/valueThe paper is promoting valuation accuracy, efficiency and reliability in the developing economies by advocating for advanced valuation methods. It is the first attempt to develop a valuation model for apartments in the NMA, the capital city of Kenya and the business hub of East and Central Africa.