Thesis Abstract

Abstract
Investor confidence is a critical factor in the growth and development of any real estate sector. This study aims to appraise the level of investors' confidence in the Nigeria real estate sector by examining various factors that influence their decisions. The research will utilize a mixed-method approach, combining both quantitative and qualitative data collection methods to provide a comprehensive analysis. The quantitative aspect of the study will involve the distribution of surveys to a sample of investors in the Nigeria real estate sector. The surveys will focus on gathering data regarding investors' perceptions of the current state of the real estate market, their confidence in the sector's future prospects, as well as the factors that influence their investment decisions. Statistical analysis will be conducted on the survey data to identify trends and patterns. In addition to the surveys, the qualitative aspect of the research will involve conducting interviews with key stakeholders in the Nigeria real estate sector, including investors, developers, government officials, and industry experts. These interviews will provide valuable insights into the underlying reasons for investors' confidence levels, as well as the challenges and opportunities they perceive in the sector. The findings of this research will shed light on the current state of investors' confidence in the Nigeria real estate sector and provide recommendations for enhancing investor confidence and attracting more investment into the sector. By understanding the factors that influence investors' decisions, policymakers and industry players can implement targeted strategies to improve the overall investment climate in the real estate sector. Overall, this study is significant as it contributes to the existing literature on investor confidence in real estate markets, particularly in the context of Nigeria. The research findings will not only benefit investors and industry stakeholders but also policymakers and government agencies involved in regulating and promoting the real estate sector. Ultimately, a better understanding of investors' confidence levels can lead to a more stable and prosperous real estate market in Nigeria.

Thesis Overview

INTRODUCTION

1.1      Background of the study

The The Nigerian Real Estate Sector has recorded steady and consistent growth over the last four years becoming one of the greatest contributors to the Nation’s rebased GDP from the non-oil sector – having contributed 8.03% and 11% in 2013 and 2014 respectively (Ikekpeazu, 2004). The market which is currently valued at approximately N6.5 Trillion is estimated to grow at an average of 10% over the next few years. The major growth drivers in the sector have been credited to: an increased inflow of foreign investment (especially from South Africa, MEA and the United States); increased institutional investment from local companies including PFAs and Mutual Funds; the growing population of High Net worth Individuals; and the targeted intervention of the Federal Government in the housing finance sector. This however indicates that a lot of stakeholders and investor are confident about the structure of the Nigeria real estate sector even with the dwindling economy of the nation (Olotuah, 2000).

Real estate investing involves the purchase, ownership, management, rental and/or sale of real estate for profit. Improvement of realty property as part of a real estate investment strategy is generally considered to be a sub-specialty of real estate investing called real estate development. Real estate is an asset form with limited liquidity relative to other investments, it is also capital intensive (although capital may be gained through mortgage leverage) and is highly cash flow dependent (Agbola, 1998). If these factors are not well understood and managed by the investor, real estate becomes a risky investment. The primary cause of investment failure for real estate is that the investor goes into negative cash flow for a period of time that is not sustainable, often forcing them to resell the property at a loss or go into insolvency. A similar practice known as flipping is another reason for failure as the nature of the investment is often associated with short term profit with less effort.

 

The success of any investment activity rests heavily on the availability of adequate finance in real estate investment which more often than not is beyond individual investors’ current financial resources. This financial insufficiency naturally turns investors to financial institution for possible credit advancement. Mbanefo (2002) observed that the importance of banks in our economy lies in their monopoly  of the resources to provide loans for industrial and commercial developments. The provision of this loan however, carries the risk of default in repayment hence the need to take adequate, reliable and appropriate security for the purpose of insulating default risk associated with credit transactions in banks.

Real estate continues to be in high demand indicative of investor’s confidence since it meets the need of the public consumer. A hotel, commercial office, residential estate or retail park will continue to perform well, whether on the basis of sales or rents as long as the product meets the needs of the consumer on the basis of location, price and quality. We are beginning to see the green shoots of recovery in investor confidence across the Nigerian real estate sector. This is evident in the number of hospitality & leisure, residential, retail and commercial office transactions either in the early stages of development or in the planning.

Real estate markets in most countries are not as organized or efficient as markets for other, more liquid investment instruments. Individual properties are unique to themselves and not directly interchangeable, which presents a major challenge to an investor seeking to evaluate prices and investment opportunities. For this reason, locating properties in which to invest can involve substantial work and competition among investors to purchase individual properties may be highly variable depending on knowledge of availability. Information asymmetries are commonplace in real estate markets. This increases transactional risk, but also provides many opportunities for investors to obtain properties at bargain prices. Real estate entrepreneurs typically use a variety of appraisal techniques to determine the value of properties prior to purchase to boosting investor’s confidence (Agbola, 1998).

Investor’s confidence in real estate is determined by an investment rating of a real estate property which is the measures of the property’s risk-adjusted returns, relative to a completely risk-free asset. Mathematically, a property’s investment rating is the return a risk-free asset would have to yield to be termed as good an investment as the property whose rating is being calculated. The underlying drivers for property ratings are the dividends (net operating income) and capital gains over a certain holding period, and their associated risks or variances. A property’s investment rating is then a transformation of the risk-adjusted averaged return to a single number that conveys the property’s long-term potential to yield profits.

1.2   STATEMENT OF THE PROBLEM

The Real Estate sector offers a great potential source of growth for Nigeria. Until now, the understanding of its composition and growth has been somewhat limited to its required use in Nigerian national accounts without considering the role of investor. Currently, Nigeria is in the midst of a housing boom, primarily due to the great demand created by a rising population. Nigeria’s housing deficit is estimated to be 17 million as of August 2012 which has gave several investors confidence of profitability in real estate in Nigeria. However, the researcher seeks to provide an overview of the investor’s confidence in the Nigerian real estate sector.

1.3   OBJECTIVES OF THE STUDY

The following are the objectives of this study:

1. To examine the level of investor’s confidence in the Nigerian real estate sector.

2. To determine the factors that can enhance the investor’s confidence in the Nigerian real estate sector.

 

3. To determine the factors that can reduce the investor’s confidence in the Nigerian real estate sector.

1.4   RESEARCH QUESTIONS

1. What is the level of investor’s confidence in the Nigerian real estate sector?

2. What are the factors that can enhance the investor’s confidence in the Nigerian real estate sector?

3. What are the factors that can reduce the investor’s confidence in the Nigerian real estate sector?

1.6   SIGNIFICANCE OF THE STUDY

The following are the significance of this study:

1. The findings from this study will educate the general public on the activities of the real estate agents in Nigeria pointing out for analysis factors that can bring in more investors to the sector of the economy.

2. This research will also serve as a resource base to other scholars and researchers interested in carrying out further research in this field subsequently, if applied will go to an extent to provide new explanation to the topic.

1.7   SCOPE/LIMITATIONS OF THE STUDY

This study on the appraisal of investor’s confidence in the Nigerian real estate sector will cover the prospects of investors in the Nigerian real estate sector. It will also cover the factors that can boost investor’s confidence in the Nigerian real estate sector.

LIMITATION OF STUDY

Financial constraint– Insufficient fund tends to impede the efficiency of the researcher in sourcing for the relevant materials, literature or information and in the process of data collection (internet, questionnaire and interview).

 Time constraint– The researcher will simultaneously engage in this study with other academic work. This consequently will cut down on the time devoted for the research work.

1.8      Organization of the study

This research work is organized in five chapters for easy understanding as follows Chapter one is concern with the introduction which consist of the (overview, of the study), statement of problem, objectives of the study, research question, significance or the study, research methodology, definition of terms and historical background of the study. Chapter two highlights the theoretical framework on which the study it’s based thus the review of related literature. Chapter three deals on the research design and methodology adopted in the study. Chapter four concentrate on the data collection and analysis and presentation of finding. Chapter five gives summary, conclusion and recommendations made of the study.