The Influence of GDP on Rental Growth of Residential Properties in Ede, Nigeria

Abstract

Changes in rental values may occur in response to changes in economic conditions at all levels of an economy. Against the backdrop of recent unstable GDP growth rates in Nigeria, this study evaluated the influence of GDP on rental growth rates of residential properties in Ede, Nigeria with a view to providing information that will aid better understanding of the dynamics of residential property market for investment decisions. It analyzed the magnitude of growth in rental values of five residential property types comprising tenement room, one room self-contained, room and parlour self-contained, two bedroom flat and three bedroom flat to determine whether significant difference exist in the growth rates across the five property types; the extent of variation in the rental values of the properties types in Ede caused by GDP growth; and also, the relationship between GDP growth rates and rental growth rates of residential properties in the study area. The study utilized both primary and secondary data. Primary data used for the study was collected through structured questionnaire administered on landlords who rented their properties within the study period and comprised rental values of five residential property types between 2002 and 2017. Secondary data for the study comprised Nigeria’s GDP figures between 2002 and 2017. Descriptive and inferential statistical techniques such as frequency table, chart, ANOVA and linear regression were used to analyse the data. The results revealed a mean yearly growth rates of 17.03%, 17.01%, 16.57%, 19.86% and 20.83% for tenement room, one room self-contained, room and parlour self-contained, two bedroom flat and three bedroom flat respectively; and the mean rental growth rates across the selected residential property types at 95% confidence level are not significantly different F (4, 70) = 0.345 P = .847 > .05. Furthermore, during the period under study, GDP values were found to have a strong positive relationship with rental values of residential properties in the study area and accounts for about 73%, 75%, 82%, 76% and 83% of variation in rental values of tenement room, one room self-contained, room and parlour self-contained, two bedroom flat and three bedroom flat respectively. The study however found no statistically significant relationship between GDP growth rates and rental growth rates of residential properties in the study area. Consequently, the study concluded that GDP growth rates do not have significant influence on rental growth rates of selected residential properties in Ede during period understudied.