Urban land speculation: model development

Abstract

PurposeThe aim of the research is to examine the role of property tax in land and building administration and to develop a dynamic model. The paper investigates the extent to which local governments take advantage of property tax in generating revenue and encouraging certain life cycle assessment-oriented land and building speculation patterns in Shashemene, Ethiopia.Design/methodology/approachThe study was conducted using case study and survey research strategies. Shashemene's administrative area (i.e. specific to four peri-urban villages) was purposively selected as the case study area. A combination of different data collection instruments was employed: questionnaires and field observation. Moreover, an extensive survey of owners of undeveloped land and building, throughout the study area, was conducted. Multiple regression analysis was applied to the analyzed data as well as the use of dynamic modeling of land and building via qualitative and numerical analysis of property.FindingsResults indicate that speculators will hold land and building for a marginal period only if the difference between present net rates of return exceeds the difference between discounted expected percent return.Practical implicationsThis paper provides a simple model to recognize the optimum length of time to hold a parcel of land and building from the market by land speculators.Originality/valueThe introduction and potential implementation of dynamics modeling to the local government calls for controlling speculation that has resulted in local revenue enhancement.