The Property Market Maturity Framework and its Application to a Developing Country:
The Case of Nigeria
Solomon Akinbogun, Colin Jones and Neil Dunse
1
Abstract
This paper explores the concept of property market maturity by reference to the residential
property market in Nigeria as a developing country. It builds on the market maturity
framework which was primarily developed to compare office property markets in European
countries and appraises its application to developing countries. In the process the paper
seeks to adapt the market maturity criteria to incorporate a checklist of characteristics
applicable to a developing country. It recognises the priority of place occupied by
information in the determination of property market maturity in European office markets
but argues that this stems from a sophisticated land registration system. The level of
compliance with planning is an important criterion affecting the state of market maturity
missing from the original elaboration.
Keywords; market maturity, transparency,
property
market,
residential,
developing
countries, planning
2
Introduction
Unlike the stock market, the property market is generally perceived as imperfect market
with a set of constraining influences on information and demand and supply flows.
However, in practice there are no unique characteristics that relate to and define all
property markets. Property market constraints vary across countries with institutional
differences for example in lease law, planning, and land registration procedures. This has
important ramifications particularly for international property investment and it is in this
context that researchers began to compare property markets through the concept of
market maturity. Maturity in these studies is measured in relative terms, and initially
compared countries across Europe and then Asia. Seen from a global perspective such a
comparison is of only a relatively narrow spectrum of property markets. Prima facie it is
probable that the concept will need to be refashioned to incorporate the more informal
frameworks of property markets in developing countries. This paper seeks to reconsider
and extend this concept to a broader range of property markets by encompassing
developing countries and looking at the related notion of transparency. This paper tackles
this task by specific reference to the operation of the residential property market in Nigeria.
The paper is divided into four sections. Section Two dissects the definition of market
maturity by a review of the literature. The next section examines the issues involved in
developing the concept, drawing on the constituents of a transparency index designed to
assess property markets across the world and the particular characteristics of developing
countries. Section 4 begins by expanding the previous criteria to capture the essential
features of a market in a developing country, and these benchmarks are then applied to the
3
residential market in Nigeria. Finally, the paper summarises the discussion and ideas on the
application of the maturity concept .to a developing country.
Definition of Property Market Maturity
The meaning of maturity as applied to all spheres of life is largely relative and the case of
property market is not an exception. The first and most comprehensive attempt at defining
this concept in the property market was given by Keogh and D’Arcy (1994) who argue that
the concept is complex, with no single criteria to classify a property market as mature or
not. Rather, maturity in the property market is subjectively determined; it is more of a
normative economic ideal which incorporates value judgements expressing support for
certain desirable market qualities. But from a positive economic perspective market
maturity helps determine the attractiveness of real estate (and the market in which it is
embedded) as a good choice of investment.
Keogh and D’Arcy (1994) observed that a property market may take a traditional and simple
form in which the real estate sector is poorly developed and lacks an identifiable separate
market for users’ and investors’ interests. Alternatively, it may be highly mature with a
sophisticated and well established real estate profession providing the essential requisites
for use and investment real estate markets. Their study established six criteria for
determining property market maturity using subjective judgement that classified each
criterion into low, medium and highest. The essential characteristics were deemed as:

Existence of a sophisticated profession with its associated institutions and
networks

Extensive information flow and research activities
4

Flexible market adjustment in both the short and long run

Market openness in spatial, functional and sectoral terms

Standardisation of property rights and market practice

Accommodation of a full range of use and investment objectives
The criteria were used as a framework to assess maturity of three case study European
office markets; London, Barcelona and Milan. Three significant conclusions were drawn
from the comparison. First, the significant role played by legislation in the emergence and
maturity of a property market. For example, specific reference was made to the
contributions of the UK Landlord and Tenant Act promulgated in 1954 for the development
of a contemporary property investment market offering security of tenure to tenants,
secure market value, true rent adjustment and efficiency in property utilisation. Second,
that the alignment of the property market participants within a highly professionalised
property market is a key factor which aided the maturity of the property market.
Established professional bodies, for instance the Royal Institution of Chartered Surveyors
(RICS) set standards and validated educational programmes for vocational qualifications.
Finally, they observed that both the volume of property transactions and the channels by
which they were handled was also a significant signal of maturity. For example, 90 percent
of transactions passed through the hands of RICS accredited professionals.
Inevitably this classification remains subject to debate as no scientific means were
employed to calibrate the criterion employed, although an element of this fact is recognised
by the authors in the conclusion to their paper. They argue that maturity needs to be
5
articulated and quantified in more detail and that there is no single evolutionary path which
will be followed by all property markets to achieve maturity.
The broad framework has been adopted and expanded by a number of authors inter alios
Lim et al (2006), Lieser (2011) and Edelstein et al (2011). Chin and Dent (2005) and Chin et al
(2006), for example, attempt to quantify relative market maturity between five cities in
South East Asia by asking property researchers in international property consultants to give
their numerical assessments of each of the criteria. This is an interesting application seeking
a means to quantify the concept and apply it but this work, or the work of others, does not
ask any fundamental questions, for example about the path to maturity or the choice of
criteria.
In looking further at Keogh and D’Arcy’s notion of market maturity it is first relevant to note
that it is a broad ‘macro’ rather than ‘micro’ concept. It does not relate directly to a final
stage in the development of a (mature) market for some new land use or for the
introduction of a ‘new’ real estate form in a particular location or neighbourhood of a city.
The process of the establishment of markets for land uses in new locations or new property
forms such as retail warehouses has been considered in a series of papers under the banner
‘sustainable’ markets (for example Jones and Watkins, 1996; Jones, 2009). Similarly it could
not be applied to say assess the progress of the evolution of the private rented housing
sector in the UK through the expansion of buy to let mortgages. Market maturity as devised
by Keogh and D’Arcy refers to the wider institutional system within which property markets
operate.
6
Such institutional frameworks as characterised by Keogh and D’Arcy encompass the
standardisation of property rights, information availability, flexibility of market adjustment,
the role of real estate professionals, the openness of the real estate market to outsiders and
the ability of use and investments of properties to be separated. This is arguably a partial
picture of property market characteristics, combining selective institutional inputs that
shape property markets and outputs. It also does not weight the importance of the
different benchmarks.
Transparency first emerged as an extension of market maturity and then as an alternative
measure for (comparative) investment purposes (Lee, 2005). Jones Lang LaSalle (2012) have
developed a global transparency index that is arguably a more sensitive approach to
assessing property market characteristics. The index covers 97 countries with the bottom
position occupied by Sudan. It embraces not just commercial property but also residential.
This transparency index is based on five sub-indices relating to property performance
indicators, market fundamentals/data availability, governance of listed vehicles, regulation
and the transaction processes derived from a combination of quantitative and qualitative
measures. These are weighted in the index accordingly:

Performance Measurement – 25%

Market Fundamentals - 20%

Governance of Listed Vehicles – 10%

Regulatory and Legal - 30%

Transaction Process – 15%
7
Property performance indicators relate to the existence of indices of direct and indirect
property investment returns plus the size of the institutional real estate investment market
and the frequency and use of independent valuations. Data availability is assessed by the
existence and length of time series on markets and individual properties and transactions.
Regulation relates to more than the property process but also to consistency of company
taxation and building regulations as well as contractual obligations. Land regulation is
defined in terms of the availability and completeness of title records, compulsory purchase
procedures, controls on bank lending and data on debt. The transaction process is scored
by reference to the quality and availability of pre-sale information, fairness and
confidentiality of the bidding process, professional and ethical standards of property agents,
as well as the delivery of occupier services.
The index is used to classify countries into ‘highly transparent’ with scores 1 to 1.7,
‘transparent’ (1.7-2.6), ‘semi-transparent’ (2.6-3.76), ‘low transparency’ (3.76-4.2) and
‘opaque’ (above 4.2). A score of 5 indicates total market opaqueness. Table 1 presents a
selection of market types and their relative position.
Table 1
Global Real Estate Transparency Index: Selected Markets
Transparency Level
Market (In order of transparency)
2012
High
United States, United Kingdom, Australia
Transparent
Hong Kong, Germany, Singapore, South Africa, , Malaysia,
Semi Transparent
Taiwan, Turkey, China - Tier1, Greece, UAE – Dubai, , Argentina,
Bahrain, Saudi Arabia, Kenya,
Low
Vietnam, Qatar, Jamaica, Egypt, Zambia, Peru, Jordan, Uruguay,
Colombia,
8
Opaque
Mongolia, Tunisia, Ghana, Iraq, Pakistan, Algeria, Nigeria, Sudan
Source: Jones Lang LaSalle (2012)
The transparency index has been refined over time since first published in 1999 but as most
sub-Saharan African countries have been included for the first time in the 2012 index it is
impossible to consider the evolution of these markets over time. The index itself is designed
to reflect the demands of cross-border investors and corporate occupiers rather than stages
in the emergence of a mature market.
The classifications above are determined by
percentile ranking not absolute scores.
Yet there is clearly an overlap between the
transparency index and the Keogh and D’Arcy concept of maturity. Both incorporate explicit
criteria linked to information, performance measurement and property rights, and they
refer to the role of a property profession albeit in different ways. The transparency index
can be viewed as an advance in the sense it seeks to quantify the selected criteria, although
the weighting of the scores seems arbitrary and the inclusion of indirect property
investment indices is only relevant to advanced stages of maturity/developed countries. The
Keogh and D’Arcy concept goes further than transparency by reference to market flexibility
and the accommodation of a full range of use and investment objectives.
It is fair to say that the starting point for both these overlapping concepts is developed
countries and neither approach sits easily as measures of the relative state of property
markets in developing countries. The rest of this paper attempts to redress the balance by
examining in detail real estate markets in developing countries. It is instructive to consider
the evidence and arguments presented by Dowall and Ellis (2009) on the property market in
the Punjab in Pakistan. Like much such research funded in third world countries by the
World Bank it is concerned that the inefficiencies of the property market create barriers to
9
economic development. The Punjab is typical of developing economies in the process of
transforming from an agricultural to a manufacturing and service-based economy, leading to
massive urbanisation. This research argues that there are a range of impediments to
efficient urban land and housing market performance: in the Punjab due to excessive public
land ownership, inadequate social infrastructure, limited property rights, restrictive urban
planning policies and construction regulations, constraints on financing property
development and acquisition, rent controls and inadequate property-tax-based revenuegenerating mechanisms.
Not all of these relate to the characteristics of the property market. At the heart of property
market inefficiencies are the land registration and planning policies. While a high
percentage of publicly owned land is viewed as a problem it is primarily because the
government does have sufficient resources to invest in social infrastructure. The property
finance issue has a prerequisite in the lack of land registration but is the result of a broader
range of forces. The paper highlights the role of the ‘informal’ land sector which exists partly
because of traditional oral declaration of land gifts and land registration is optional and the
land registration systems are complex, incomplete and unreliable.
Planning policies are
very prescriptive with fixed minimum and maximum land density regulations. The planning
process is also very cumbersome because of the layers of bureaucracy created by tiers of
independent local governments/agencies with different by-laws and a lack of a clear
framework of responsibilities (Dowall and Ellis, 2009). The research therefore stresses the
significance of what may be termed the land administration of a nation as the key to an
efficient property market.
10
This conclusion is common with the evidence from many African studies that have identified
the importance of land administration systems, in particular identifying the importance of
the distinction between formal and informal mechanisms in the operation of land and
property markets (see for example Antwi and Adam (2003), Okoth-Ogendo (2007), Akrofi
and Whittal (2013)). The scale and significance of this issue is a central element of any
assessment of market maturity in a developing country. In terms of the wider extension of
the maturity criteria an additional planning system criterion is arguably important to
support the functioning of the property market in providing a framework to address
negative externalities and promote development. It is an almost ubiquitous element of
western economies. In developing countries often experiencing rapid urbanisation in recent
decade urban environmental problems and property market constraints can also be seen as
the aftermath of poor management, poor planning and the absence of coherent urban
policies (UNEP, 2002). The incorporation of a well functioning planning system therefore
chimes with the original ideas of Keogh and D’Arcy that the central tenet of maturity is the
responsiveness of the market to opportunities and constraints.
In summary the original Keogh and D’Arcy analysis should be seen as a starting point to
assess the notion of market maturity although their perspective was conditioned or limited
by its reference to Western Europe. Again, a similar argument can be made for the
transparency index developed by Jones Lang LaSalle that it is designed for the developed
world. While both have been applied beyond the confines of the developed world a more
comprehensive perspective of the institutional framework of a property market would in
particular place greater stress on the effectiveness of land registration systems and
encompass the role of planning. This paper now seeks to flesh out this argument by
11
reference to the Nigerian housing market characteristics and in doing so extends the
maturity framework to residential land use and a developing country.
The State of Property Market Maturity in Nigeria
Nigeria is a country in west sub-Saharan Africa (see Figure 1) with 150 million people where
according to the United Nations, 64% of Nigerian population are living below the poverty
line while 54.1% suffer multiple deprivations and an additional 17.8% are vulnerable to it
(UNDP, 2011). Nevertheless Nigeria has the largest economy in Africa: GDP for 2013
totalled $509.9bn compared with South Africa's of $370.3bn (Economist, 2014). The World
Bank (2014) reports that Nigeria is currently experiencing steady growth in its economy with
a GDP growth of 6.7 percent, which is currently higher than other developing nations (see
Table 2).
12
Figure 1 Map of Nigeria
Table 2:
Gross Domestic Product growth rate in Nigeria
Sub-Saharan
Africa
Nigeria
Developing
Nations
2012
3.5
2013
4.7
2014
5.3
2015f 2016f
5.4
5.5
6.6
4.7
6.7
4.8
6.7
5.3
6.8
5.5
6.8
5.7
Source: World Bank (2014)
According to the Jones Lang-LaSalle (2012) transparency index, Nigeria and other African
nations need a massive improvement in their transparency. They note that despite the
attractiveness of the abundant natural endowment, sectarian violence and huge threat of
13
insecurity is a major barrier to would-be international real estate investors. Other property
markets classified as opaque include Tunisia, Ghana, Algeria, Angola, and Sudan. Morocco,
Egypt and Zambia are classified as countries with low transparency while Kenya and
Botswana are grouped among countries semi-transparent property market. The South
African property market is the only African market designated as transparent with
composite score of 2.18 and ranked 21 globally. The overall picture for African countries is
given in Table 3.
Table 3
Property Market Transparency Index for African Countries
Transparency Level 2012
Market
Composite Composite Score
Rank
High
0
0
Transparent
South Africa
21
2.18
Semi Transparent
Botswana
56
3.36
Kenya
65
3.70
Morocco
76
3.88
Egypt
77
3.88
Zambia
78
3.93
Tunisia
89
4.38
Ghana
90
4.41
Algeria
93
4.49
Angola
95
4.57
Nigeria
96
4.58
Sudan
97
4.59
Low
Opaque
Source: Jones Lang LaSalle (2012)
The Nigerian property market is classified as opaque and ranked in 96th position out of 97 in
the Jones Lang LaSalle (2012) transparency index and this classification is supported by a
14
few academic papers using Nigeria as a case study. For example, Famuyiwa & Otegbulu
(2012), Oni & Ajayi (2011), Aluko (2011) and Oduwaye (2009) have shown marked
difference in property value (sale and rental) on similar property in across various
neighbourhoods in Lagos. The studies note that discrepancies in property values are mainly
attributed to the level of infrastructure provision. In a specific study carried out by Butler
(2009) and Butler (2012), they argue that the fundamental problems with the Nigerian land
market are widespread informalities; poor planning and sub-division practice, as well as
insufficient creation of good titles are the major cause.
It is in this context that the paper now details the characteristics of the residential property
market using the following attributes:

Existence of a Sophisticated Profession

Standardisation of Property Rights and Market Practice

Information Flows

Accommodation of a Full Range of Use and Investment Objectives

Market Openness in Spatial, Functional and Sectoral Terms

Effectiveness of Planning

Accessibility to Adequate Housing Finance
These criteria are matched with those of Keogh and D’Arcy except that of ‘flexible market
adjustment in both the short and long run’ is excluded (we return to this characteristic
later). However, reflecting the discussion above the analysis adds the ‘effectiveness of
planning’ and ‘accessibility of adequate housing finance’. The analysis takes a qualitative
analysis drawing on range of studies which by the very nature of the state of research in
15
Nigeria is fragmented and inevitably incomplete. The research is therefore illustrative
rather than definitive.
Existence of a Sophisticated Profession
The term ‘care-taker’ meaning estate agent is a popular name in Nigeria given by renters
and landlords to anyone practising estate agency in the property market. Most Nigerians are
clouded in a misconception that gives no room to differentiate between laymen and
professional estate surveyors and valuers. The latter are academically trained with relevant
professional qualification to practice estate agency in Nigeria under the regulation of the
Estate Surveyor and Registration Board of Nigeria established by legislation in 1975. The
lucrative nature of the business has attracted a high level of unprofessionalism into the real
estate industry with numerous reports of dubious activities leading to a rapid erosion of
‘Honesty and Devotion’ which is the motto of the Nigerian Institution of Estate Surveyor and
Valuers. Attempts to curb the activities of non-qualified laymen through the establishment
of the National Association of Estate Agents to act as regulatory body have failed.
Laymen are active across all cities and towns while most of the few professional estate
surveyors and valuers restrict their services to the major cities. According to Esvarbon
(2010) there are only 2,260 registered estate surveyors in Nigeria who are eligible to carry
on the practice of estate agency for over 150 million Nigerians. This means a ratio of more
than 1:66,000. This has largely left the agency aspect especially buying, selling of land and
leasing of residential properties to unqualified laymen. Given the inability of Nigerian
property market to establish a sophisticated profession and associated institutional network
16
in qualitative and quantitative term, the state of maturity of the market with reference to
this yardstick is best described as low.
Standardisation of Property Rights and Market Practice
There are two parallel land markets, formal and informal residential land market in Nigeria
and other developing nations. Nigeria has a long history of a private land market before the
enactment of the Land Use Act of 1978 which vested all land in each state in the state
governor but allowed those presently in occupation with their possessory right as if they
own a certificate of occupancy. Although the Act was a good attempt, aimed at nationalising
land and restructuring the land market, it became the beginning of an informal land market.
Over 70 percent of land transactions are traded here without recourse to a state governor’s
consent under which such right is permitted to be legally transferred in this market. Rakodi
and Leduka (2003) note that especially the poor access property rights through transactions
occurring outside state regulation and the formal land market in Africa. Olokesusi (2011)
finds that the inability of the urban poor households to gain access to formal housing
market compelled access to shelter through the informal housing supply system and slums
covering between 30% and 70% in most cities.
Rented accommodation is mainly leased out in an unfurnished state. Tenants have little or
no security of tenure. There have been attempts to improve tenure security which found
expression in the enactment of rent edicts in states like Lagos, Ondo, Cross River in the
1980s but they were not completely successful. The legal framework has remained very
feeble with regard to the standardisation of the property rights of renters.
17
Information Flows
Information concerning property transactions in Nigeria is often treated with a high level of
privacy. Land registers meant for documentation of salient properties information are often
neglected since most of the land parcels originate from the informal market. Market
information remains concealed between the parties who owe no obligation to divulge
transaction information to potential buyers or renters of residential properties. The dearth
and asymmetric nature of information in the Nigerian property market provides room for
discrepancies in the purchase price of similar plots of land in the same location. It often
leaves property buyers at the mercy of sellers and their bargaining skills.
Olaleye (2008) notes in a study on investment information, that available in-house
information for diversification of investment portfolio in Nigeria is limited. While in-house
documented source ranked first, information from a sister firm and developer ranked
second. His study revealed that the absence of a database for the Nigeria property market
culminated in naïve property investment diversification strategies. The flow of property
information must be ranked very low in the Nigerian property market and thus impinges
negatively on the property market’s maturity. The current situation can be characterised by
a small number of informed participants contrasting with a vast majority who are
uninformed operating in a relatively unreliable information environment.
Accommodation of a Full Range of Use and Investment Objectives
There is no adequate residential property market to service the need of low, middle and
high income earners to ensure that an individual can afford decent accommodation. It is
generally observed that there is only a limited range in the residential property market with
18
the result that people can pay a substantial part of their income as rent particularly in the
cities. This is illustrated by a study of tenants by Aribigbola (2008) in the city of Akure. Rent
accounted for between 30 to 60 per cent of income of 37% of tenants in his survey. His
survey also revealed 17.7% of the households spent between 60 to 90 per cent of their
income on accommodation.
Accessibility to Adequate Housing Finance
Mortgage finance is available only on a limited basis. in the Nigeria property market. As
reported by EFInA (2010) a recent survey found that personal saving, representing 60
percent of funds, is the largest source of housing finance in Nigeria (see Table 4). In contrast
the contribution of mortgages to housing finance accounted for only 23 per cent of
purchasers. Gifts in cash and in kind represented 8% of housing finance while each of the
other sources namely thrift, pension and borrowing respectively accounted for 3% of the
sources for housing finance in Nigeria.
Table 4
Sources of Housing Finance in Nigeria
Source of Fund
Percentage
Personal Saving
60
Mortgage
23
Gift
8
Pension
3
Thrift (Esusu & Ajo)
3
Borrowing from friends
3
Source: Adopted from EFInA (2010)
19
The housing finance situation affects the number and quality of housing supply. Paucity of
finance has forced many households to self build and occupy uncompleted buildings in a bid
to utilise the rent they would have paid to finance their housing projects. The consequence
is that for many is that housing is built incrementally as savings accumulate. Hence it is
common to find occupied housing without windows, partly roofed, without doors, floor
without floor screed or finishes and non plastered wall. The evidence is that the property
market finance products are deficient in quantity and quality.
Market Openness in Spatial, Functional and Sectoral Terms
The housing market is highly segmented between the formal and informal sectors. The
formal sector is spatially confined with its size in most urban centres relatively small. The
formal land market is normally considered as the home for the highly connected and
wealthy people. The application for land allocation in this sector is the subject of unending
bureaucratic processes with an average waiting time spanning between 2 to 4 years before
allocation. The openness of the formal land market also suffers from lack of political will to
acquire more land from family holdings and allocate it directly to the wider populace.
Though the price of plots of land in the formal market is relatively cheap when compared
with the informal market, the closed nature of the market restricts most people from
patronising it.
The stringent barriers to entry to housing for sale in both the formal and informal property
market segments restricts home ownership to mostly high and middle income earners in a
country where the majority are low income earners and over 60% live below the poverty
level. As a result the level of home ownership, according to Adediji (2009) home ownership
20
is less than 20% as 87% of the total households are tenants. The home ownership level in
Lagos is no better, despite its status as former federal capital city, the most populated city
and Nigeria’s commercial nerve centre; 60% of the households are private tenants (Adedeji
2009).
Effectiveness of Planning
Nigeria has a planning system which is guided by the Urban and Regional Planning Law of
1992. The law provides that;
“Save as permitted under Section 34 of this Act, from the commencement of this Act no
person shall in an urban area shall
a) erect any building, wall, fence or other structure upon or
b) enclose, obstruct, cultivate or do any act on or in relation to, any land which is not
the subject of a right of occupancy or licence lawfully held by him or in respect of
which he has not received the permission of the Governor to enter and erect
improvement prior to the grant to him of a right of occupancy.
Any person who contravenes any of the provisions of subsection (1) shall on being
requires by the Governor so to do any within the periods of obstruction, structure or
thing which he may have caused to be placed on the land and he shall put the land in
the same condition as nearly as may be in which it was before such contravention.”
Land Use Act, Section 43(1&2).
There is a gulf between the planning legislation and its implementation. The enforcement
of this law has achieved little or no success as the example of Akure, a provincial city
illustrates. According to Fadairo and Ganiyu (2008) 60% of the houses constructed along the
21
Ala River in this city did not observe the minimum setback leading to the annual occurrences
of flooding. A particular reason is the lack of professional resources to support planning.
Akure suffers from inadequate trained manpower necessary to enforce development
control. Table 5 shows the level of professionalism of area planning office staff responsible
for urban development control in the city. There were only 14 planning staff and just two
staff, representing 14%. are professional planners registered by Town Planners Registration
Council of Nigeria.
Table 5
Categorisation of Planning Staff into Level of Professionalism in Akure
Category of Staff
Registered Planner
Number of Staff
2
Percentage
14
Sub- Professional
2
14
Town Planning Assistant
6
43
Others
4
29
Source: Adapted from Aribigbola (2008)
The effectiveness of planning as a tool for development control has been rendered very
weak as a result of spectrum of factors from lack of political will to corruption. Lack of a
political will to implement master plans tends to freeze development despite rapid upsurge
in urban population. The result is the development of irregular land use patterns at periurban areas. This is illustrated by the case in the provincial city of Abuja. The city was to be
developed in five phases of a master plan for specific a population threshold; however, the
population doubled during the first phase before the master plan was implemented. This led
to a burst of residential development to accommodate the critical mass of people in urgent
need of shelter. According to Akinbogun (2007) the result was massive deviation from the
master plan with significant consequences for the housing built without planning
22
permission. His findings, shown in Figure 2, reveal that 42 per cent of the residential
building which violated the master plan was constructed directly on a sewer line while 19
per cent were constructed too close to it. In addition 19 per cent of the buildings impinged
on the right of way designated for an expressway.
Figure 2 Breakdown of Planning Issues of Housing Built without Planning Permission
Source: Akinbogun (2006)
Overview
The property market in Nigeria has significant inefficiencies, and many of the difficulties
with regard to market openness and market responsiveness can be traced to the door of the
land registration system with its parallel formal /publically registered land titles and the
informal sector which follows the traditional land distribution system that is unwritten. This
leads directly to problems of market information and is compounded by a property
profession that is thinly distributed so that there is considerable scope for exploitation of
buyers and sellers of land. There is a pressing concern in Nigeria as there is a housing
shortage reflected inflexibility in market adjustments in both the short and long run.
23
According to the Ayodele et al (2013) the inability of the property market to meet the needs
of the population is basically due to a combination of the lack of effective demand and lack
of affordable supply which in turn stems directly from the institutional factors considered.
Importantly these institutional factors encompass the weak planning system that is
compounding the inherent complexities of a market constrained on the one hand by
extensive bureaucracy in the formal sector and also by the lack of it in informal sector.
The evidence presented is very piecemeal, reflecting the lack of systematic and extensive
research on African property markets, but yet it demonstrates with crystal clarity that the
property market in Nigeria is both immature and that it concurs with the opaque
classification given by the global standard measure of real estate market transparency.
However, the analysis also confirms that market characteristics that define and catalogue
this immaturity are not fully addressed in the standard criteria set out by Keogh and D’Arcy
or Jones Lang LaSalles’s transparency index. This paper has adapted this framework to
include criteria that reflect Africa in general and Nigeria specifically. In addition the analysis
implicitly suggests that a key factor in the relative operation of housing markets is the state
of the economy including in particular the level of GDP per capita.
Conclusions
The objective of this paper is to re-examine and broaden the concept of market maturity
developed by Keogh and D’Arcy to relate it to developing countries using Nigeria as a case
study. The paper also applies the maturity criteria to the housing market as arguably the
same principles apply. .Despite extensive citations generated by the original paper it has
not been developed and instead academic research in this area has switched to the
24
comparison of investment attractiveness of different countries incorporating not just
institutional factors but also relative real estate returns. The nearest strand of research that
can be seen as deriving from the maturity concept is the transparency index developed by
Jones Lang LaSalle. This index incorporates some elements of Keogh and D’Arcy’s maturity
characteristics but given that its goal is to support international investment it extends to
wider investment attributes of countries including the existence of indirect investment
indices. The classification of countries that is derived from the index is based not on stages
in market development but score relativities determined by quintiles.
With increasing globalisation international investment is now considering developing
countries and symptomatic of this is that the Jones Lang LaSalle transparency index included
more countries in sub-Saharan Africa for the first time in 2012.
Nevertheless the
components of this index are designed to differentiate markets in the developed world.
Similarly the market maturity criteria were derived from markets in Western Europe. To
make meaningful assessments of market maturity (and transparency) for developing
countries it was argued earlier that the criteria applied need to be adapted to reflect the
wider spectrum of institutional characteristics.
These ideas were then illustrated by reference to the Nigerian residential property market.
While the research focuses on the housing market many of the institutional factors
reviewed could relate to the commercial property market. Many of the maturity criteria
conceived by Keogh and D’Arcy are still applicable in the context of a developing country.
However, as developed in this paper there is a need for greater disaggregation (or
25
expansion) of individual criterion. Particularly in relation to land registration and the
informal/formal dichotomy which is a major factor.
Unlike previous studies we have incorporated the effectiveness of the planning system as an
element of market maturity. The level of compliance with planning is extremely weak in
Nigeria contributing significantly to discouraging investment.
Returning to Keogh and
D’Arcy’ focus on maturity as linked to the responsiveness and flexibility of the market, there
is a clear case that the efficacy of the planning system has contributed to the weak state of
property market maturity in Nigeria. Accessibility to housing finance is also shown to be
necessary to overcome the capital required to purchase housing. Finance constraints
contribute to the poor responsiveness of supply (rendering the property market almost
perfectly inelastic) to change in demand especially by the low income group.
Finally the state of property market maturity is linked to the state of the macroeconomy
although the causal relationship is blurred and typically real estate markets are seen as a
constraint on economic development. There is an inevitable interaction between the
structure of the economy economic growth and the evolution of property market.
26
References
Adediji, B., The State of Lagos Housing Market 2009. Lagos: Roland Igbinoba Real
Foundation for Housing and Urban Development. 2009
Akinbogun, S. P., An Assessment of Land Encroachment and its Implication on Development
in Abuja, MSc, Federal University of Technology, Akure, 2007.
Akrofi E.O. and J. Whittal, Compulsory Acquisition and Urban Land Delivery in Customary
Areas in Ghana, South African Journal of Geomatics, 2013, 2:4, 280-295
Aribigbola, A., Improving Urban Land Use Planning and Management in Nigeria: The Case of
Akure, Theoretical and Empirical Researches in Urban Management, 2008, 3:9, 1-14.
Aluko, O., Spatial Scales and Measurement of Housing Values in Nigeria: the Case of
Metropolitan Lagos, Ethiopian Journal of Environmental Studies and Management, 2011,
4:4, 27-38.
Antwi A. and J. Adams. Economic Rationality and Informal Urban Land Transaction in Accra,
Ghana, Journal of Property Research, 2003, 20:1, 67-90.
Aribigbola, A., Housing Affordability as a Factor in the Creation of Sustainable Environment
in the Developing World: The Example of Akure, Nigeria. Journal of Human Ecology, 2001,
35:2, 121-131.
Ayodele, O., F. Obafemi and A. Sebatine, Options for Sustainable Finance in Nigeria. British
Journal of Economics, Finance and Management Sciences, 2013, 8:2, 22-48.
Butler, S., The Nigerian Land Market and the Land Use Law of 1978: Focus on Land in Africa,
2012. Available: http://www.focusonland.com/fola/en/countries/brief-nigerian-landmarkets-and-the-land-use-law-of-1978/
Chin, H. and P, Dent, An Analysis of the Level of Maturity in South-East Asian Property
Markets. Pacific Rim Property Research Journal, 2005, 11:4, 355-372.
Chin, W., P. Dent, P. and C Roberts, An Explanatory Analysis of Barriers to Investment and
Market Maturity in Southeast Asian Cities, Journal of Real Estate Portfolio Management,
2006, 12:1, 49-57.
D'Arcy, E. and G. Keogh. Territorial Competition and Property Market Process: An
Exploratory Analysis, Urban Studies, 1998, 35:8, 1215-1220.
Dowall, D.A. and P. D. Ellis, Urban Land and Housing Markets in the Punjab, Pakistan, Urban
Studies, 2009, 46:11, 2277-3000.
27
Economist (2014) How Nigeria’s economy grew by 89% overnight, April 7 2014
http://www.economist.com/blogs/economist-explains/2014/04/economist-explains-2. Last
accessed 20th May 2014.
Edelstein, R., W. Qian, W. and D. Tsang, How Do Institutional Factors Affect International
Real Estate Returns? Journal of Real Estate Economics and Finance, 43:1-2, 130-151.
Enhancing Financial Innovation and Access (EFInA) EFInA Access to Financial Services in
Nigeria 2010 Survey. EFInA, 2010.
Englund, P., K-H Kim, S. Malpezzi and B. Turner, Housing Tenure Across Countries: The
Effects of Regulations and Institutions. Paper presented at the AREUEA 14th Annual
International Conference, Los Cabos, Mexico, 2005.
Estate Surveyor and Valuers Registration Board of Nigeria. Members (ESVARBON). 2010.
Available: http://www.esvarbon.gov.ng/member.php. Last accessed 10th April 2014.
Fadairo, G. and S. Ganiyu, Effects of Flooding on the Built Environment in Akure, Nigeria. in
Laryea, S., R.T.F. Leiringer, and W. Hughes, eds. Proceedings of the West Africa Built
Environment Research (WABER) Conference, Accra, Ghana, 27-28 July 2010.
Famuyiwa, F. and A.C. Otegbulu, Public Water infrastructure in Property Prices: an
Environmental Valuation Approach, Elixir Infrastructure Management Journal, 2012, 51,
11034-11038.
Jones, C., Remaking the Monopoly Board: Urban Economic Change and Property
Investment, Urban Studies, 2009, 46:11, 2363-2380.
Jones, C. and C. Watkins. Urban regeneration and sustainable markets, Urban Studies, 1996,
33:7, 1129-1140.
Jones Lang LaSalle, Global Real Estate Transparency Index: Real Estate Transparency Back on
Track, 2012 http://www.joneslanglasalle.co.uk/GRETI/engb/Documents/GRETI/docs/TransparencyIndex_2012.pdf. Accessed March, 2013.
Keogh, G. and E. D'Arcy, Market Maturity and Property Market Behaviour: A European
Comparison of Mature and Emerging Markets, Journal of Property Research, 1994, 11;3,
215-235.
Lee, S., The Risk of Investing in the Real Estate Market of the Asian Region. Reading,
Department of Land Management University of Reading, 2005.
28
Lim, L. C., S. McGreal, and J. R. Webb, Perceptions of Real Estate Investment Opportunities
in Central South America and Africa, Journal of Real Estate Portfolio Management, 2006,
12:3, 261-276.
Lieser, K.. Pricing of Specific Real Estate Market Risks for 66 Countries Worldwide, IESE
Business School Working Paper WP -940, University of Navarra, 2011.
Odame, W.K., (2012): The Nascent Residential Investment Market in Ghana, Journal of Real
Estate Literature, 2012, 20:2, 289-304.
Okoth-Ogendo, H.W.O., Formalising "Informal" Property Systems: The Problem of Land
Rights Reform in Africa. Available:
https://learning.uonbi.ac.ke/courses/GPR203_001/document/formalising_the_informal.pdf
.. 2007. Last accessed 20th April 2014.
Olaleye, A., Property Market Nature and the Choice of Property Portfolio Diversification
Strategies: The Nigeria Experience. International Journal of Strategic Management, 2008,
12:1, 35-51.
Olokesusi, F., Lagos: The Challenges and Opportunity of an Emergent African Mega City.
National Institute of Science Education and Research (NISER) No 5 Ibadan, Nigeria, 2011.
Oni, A.O. and C.A. Ajayi, Land Value Determinants and Rental Values of Office Spaces in
Ikeja, Nigeria. Mediterranean Journal of Social Sciences, 2011, 2:2, 232-250.
Rakodi, C. and C. Leduka, Africa's Urban Land Markets: Piecing Together an Economic Puzzle
UN Habitat, 2013
United Nations Development Programme (UNDP). Sustainability and Equity: A Better Future
for All. Human Development Report 2011, Palgrave Macmillan, New York, 2011
National Institute of Science Education and Research (NISER), Bhubaneswar, Odisha.
World Bank. Global Economic Prospects: Sub-Saharan Africa, World Bank. Available:
http://www.worldbank.org/en/publication/global-economic-prospects/regionaloutlooks/ssa. Last accessed 20th April 2014.
29