Are you a homeowner or real estate investor looking to obtain property valued in Nigeria? If so, this is the article for you. We will go over everything you need to know about property valuation in Nigeria.
We will cover topics such as understanding what valuation is and why it is important, what factors affect a property’s value, and how to obtain an accurate estimate. Therefore, whether you are a first-time homebuyer, seller, or seasoned real estate investor, this article will surely give you all the information you need on property valuation in Nigeria.
Let’s get started!
What Is Property Valuation and Why Is It Important in Nigeria?
Property valuation is the detailed process of determining an asset’s or real estate’s value.
This specialized process requires a qualified real estate professional, typically an appraiser or real estate valuer, and involves analyzing several factors, including existing comparable sales in the area, rental yields, the age and condition of the property, accessibility to desired amenities, taxes that may be associated with the property, regulations, and zoning laws.
Through rigorous data analysis and other inputs, accurate values can be established for buyers and sellers to negotiate prices or investments. It is instrumental for property owners to ensure that they obtain fair value from their properties when it is time to list them for sale.
Property valuation in Nigeria is an often-overlooked, yet essential part of owning a property. When done correctly, it can provide essential data, from the price you can expect to receive when selling your property to the various expenses associated with making improvements or building entirely new structures.
Property valuation also helps buyers understand exactly what they are getting for their money and provides confidence that the best possible price has been agreed upon. With successful valuations being beneficial, it is important to understand how to conduct your valuation processes in Nigeria.
Factors Affecting Real Estate Valuation in Nigeria
Let us proceed by learning the important factors that determine a property’s worth.
Location
This is one of the most critical factors affecting real estate valuation in Nigeria. The location of a property can impact its value in many ways, including its proximity to amenities, safety, and desirability.
Properties in desirable areas, such as those close to good schools or in safe neighborhoods, tend to have a higher value than those in less desirable areas. A 4-bedroom house in Lekki Phase I, Lagos, will have more value than Somolu, even if it has smaller rooms.
Property Type
In Nigeria, the type of property can have a strong influence on its value. This is due to the building costs and rate of appreciation associated with certain types of properties. For instance, apartments or residential properties tend to appreciate more rapidly than commercial or industrial properties in many areas of Nigeria.
This could make them a lucrative investment choice for individuals looking for higher returns without increasing monthly income from rent.
Property Size
Property size directly affects the market price of a property in Nigeria. Larger properties tend to have higher purchase prices and market values as they typically boast a larger land space, more rooms, and greater overall square footage than smaller properties.
Larger properties also give potential buyers more opportunities for home improvement, potential rental income, and extra storage space, among other things. Market competition usually drives house prices up when there is less supply in an area for larger-sized properties.
Therefore, market conditions and trends must be considered when assessing the value of any given property in Nigeria.
Age of the Property
The class and age of the property can affect its valuation. Aging properties may not be valued as highly as newer ones because they tend to require more repairs and maintenance than newer buildings to keep them operational.
Older properties may also lack the amenities and the special features that newer properties have, for example, modern kitchen and bathroom designs, which can further reduce the average rate of a property’s value depending on its class.
Condition of the Property
Property in excellent condition will be valued higher than one that is not maintained over time. This is because buyers are often willing to pay a premium for something that requires little effort on their part after purchase, such as fixing the interior or exterior of the home.
Additionally, well-maintained properties often require less costly maintenance between sales and may also come with certain bonuses, such as appliances or warranties. These factors determine the value of a home, so it pays to keep any property in a good condition whenever possible.
Accessibility
Another factor that can affect property valuations in Nigeria is accessibility. Properties located in easy-to-reach areas, such as those close to public transportation or major highways, are valued higher than those located in remote areas. Accessible properties are more convenient and therefore more desirable.
Demand
Finally, demand and market factors are other important elements that affect property valuation in Nigeria. If there is a high demand for properties in an area due to population growth or the development of new businesses, then the values of properties will increase.
This is very evident in most parts of Lagos, some areas in Abuja, and single- or two-room accommodations built close to tertiary institutions across the country. On the other hand, if there is a low demand for properties in an area, the values tend to decrease.
What Are the Various Approaches to Property Valuation?
Assessing the true value of a property can be a difficult task and is best done with the help of a trained professional, such as an appraiser or real estate agent. However, there are some steps that an individual can take to approach the actual market value of their property.
Market / Comparison Approach
In Nigeria, the most common way to determine a property’s value is to compare it with other recently sold properties.
The comparison method considers recently sold properties that are similar to the property being valued and uses this information to estimate a fair market value.
This valuation model is common with real estate agents, appraisers, and homeowners to ensure that they obtain fair value for their properties when it is time to list them for sale.
The three steps required for this process are as follows:
- Homeowners should research recently sold homes in their area for comparable prices and similar sizes, amenities, and upgrades that could affect their value.
- Neighborhoods can also have an impact on values; therefore homeowners should consider things such as school ratings or access to public spaces when researching nearby properties.
- Finally, talking with local real estate agents who know the area well and have experience valuing different types of property can give homeowners insights into the real cost of owning their homes.
A drawback of this approach is that it is often difficult to compare similar properties.
Cost Approach
Learning the cost approach to property valuation involves considering factors such as building materials, labor costs, the current state of the real estate market, and any necessary renovations.
This dependable method combines tangible costs and estimated expenses to provide an approximate value for an asset, from an analysis of building materials used, to survey the complexity of land features. There is no shortage of intricate details with the costs method as the effort put forth pays off with reliable accuracy.
With an understanding of how this assessment works, you will be well-equipped to make decisions important to your property portfolio. This approach is primarily used by prospective buyers to determine the fair price of a property listed for sale.
Income Approach
One widely applicable and accepted approach is the income approach when determining a property’s fair and accurate value. This approach requires the investor or homeowner to calculate the property’s capitalization rate, determine its net operating income, and convert these values into an estimated market value.
Though this sounds complicated, breaking down each factor step by step can help investors make well-informed decisions on their real estate investments in Nigeria. To begin with, investors should start by researching typical rental rates in their area and considering any recent changes.
They should then consider other cost factors such as tenant turnover, insurance fees, and interest rates for loans when calculating the expected returns from their prospective investment property.
Investors use this to determine a property’s value with projections for future gains.
Although this approach considers the income that can be generated from properties, such as rental income, operating expenses, appreciation potential, and other factors; it is the most difficult and can be inaccurate if the data provided are unreliable.
What Is the Best Approach for Property Valuation in Nigeria?
The best approach to property valuation in Nigeria combines the comparative value and income value approaches. This combination considers both the current and future market trends to provide an accurate estimate of a property’s value. It considers the potential appreciation of the property while also considering the current market values, thus ensuring consistent results across the board.
For example, in Lagos State, the comparative method is often used to determine the worth of the property. This involves researching similar properties in the area and adjusting their values according to the differences between them and the subject property. Factors considered included condition, size, age, quality of materials used, location, and level of amenities available.
On the other hand, the income approach estimates property value based on its potential earnings. It is mostly used for investment properties and considers factors such as rental income, maintenance costs, vacancy rates, and the extent to which the property will increase in value in the future.
Property valuers in Nigeria use both approaches to ensure accurate results. The valuation reports are then presented to clients, who use them to make informed decisions about their investments and purchases. Banks also use valuations to determine loan amounts for properties as well as for taxation purposes.
Professional Valuation in Nigeria
Valuing a property in Nigeria requires knowledge of the local system and applicable regulations and an understanding of current market value rates, all of which play a role in obtaining the right, professional valuation. To begin, consider what type of property you are evaluating; residential or commercial.
For residential properties, real estate agents can be found in the locality, such as Lagos, Kano, and Abuja, which can assist with the process. Additionally, there are independent rental prices from which to base your estimated value and private sector companies specializing in conducting comprehensive Assessed Valuations (CAVs).
The advantage here is that there is more certainty in the estimate given and fewer gray areas should an issue arise further down the line. If the property is commercial, then your best course of action would be to contact professional appraisers who would provide an appraisal report or valuers registered with relevant national or state authorities who are certified to provide professional service.
For accurate property valuation services, considering all critical variables, experienced professionals will prove invaluable resources in Nigeria.
FAQs on How to Get Your Property Valuation in Nigeria
How Much Does Property Valuation Cost in Nigeria?
The cost of property valuation in Nigeria is dependent on the complexity and size of the property being assessed. Generally, professional valuations can range from ₦50,000 to ₦200,000. Some professional valuers may charge an hourly rate for their services.
How Can I Find the Value of My Property?
The best way to determine your property’s value is to hire a professional valuer or appraiser to complete an evaluation of the property.
What Are the 5 Methods of Property Valuation?
The three common methods of property valuation are the Market Approach, Cost Approach, and Income Approach. The Market Approach uses comparable sales prices to estimate value, the Cost Approach uses construction and labor costs to estimate value, and the Income Approach looks at net operating income to estimate value.
Does It Cost to Get Property Valued?
Yes, it does cost to get a property value. Professional valuations typically range from ₦50,000 to ₦200,000. Depending on the complexity and size of the property being assessed, fees may vary.
What Should I Consider When Valuing Property?
One should consider factors such as location, size, age, condition, accessibility, and demand. Property values can be impacted by these variables in several ways, so understanding them is essential to getting an accurate valuation.
Final Thoughts
With an understanding of these different approaches to valuing a property, you can confidently begin the initial steps on your journey of assessing its worth.
A professional evaluation remains key for assessing the true value of your Nigerian property and is recommended if you have any other unresolved concerns related to the estimated value.
