AN EVALUATION OF THE EFFECT OF VOID ON RESIDENTIAL REAL ESTATE INVESTMENT RETURNS IN ABUJA, NIGERIA

Abstract

Void in residential properties within the federal capital city of Abuja is of concern to stakeholders in real estate market and government. Residential real estate investment is ventured into with expectation of having profitable returns on the huge capital outlay through income of rent or outright sale. However, rent expectation is usually jeopardised by void which occurs in the economic lifetime of the property. This study investigates the effect of void on residential real estate investment returns. Population of the study are the practicing Estate Surveying and Valuation Firms that operates within Abuja Federal Capital City (FCC) which is 171 firms according to the NIESV directory 2021 and Real Estate Agents with 388 members according to AEAN Abuja Chapter, making the total of 559 population size. 227 was adopted as sample size for the study area. Data were collected using questionnaire and observation method, opinion on factors responsible for void and the effect were gathered. Data on void within the period of 10 years (2011 – 2021) on each property were collected and analysed. The study findings revealed that the bigger the residential accommodation the longer the void period within the study area. High rent was discovered to be the most significance factor responsible for void in the study area while landlord loss of rent is the principal negative effect of void followed by loss of revenue by the government and reduction of property value. The rate of return (yield) of the residential properties in the study area ranges from 4.7% (1bedroom flat), 4.0% (2bedroom flat),4.1% (3bedroom flat), 4.3% (4bedroom flat), 4.0% (bungalow), 3.7% (Duplex) and 3.9% (Manson and Townhouse). The rate at which void affect the investment returns of the residential real estates in the study area are as follows: 1bedroom flat 8%, 2bedroom flat 24%, 3bedroom flat 30%, 4bedroom flat 34%, bungalow 33%, duplex 39% and others (mansion/town house) 55%. The study concluded that void is therefore a major risk in residential real estate investment within the federal capital city of Abuja as it is capable of affecting returns negatively. The study recommended certain measures to be taken in order to address the menace of void, such measures include downward review of rent, imposition of tax by the government on void properties and professional advice in residential real estate investment decisions particularly, determination of rent and sales price.