The Valuation of waterfront Properties Along the Coastline of Kenya

363 Pages·2016·5.54 MB·English

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THE VALUATION OF VfATBEFRONT PROPERTIES
ALONG THE COASTLINE OF KENYA
BY
H . A . SWA7.UR1, R.A., M . A . {UoN. NPB).
A THESIS SUBMITTED IN FULFILMENT FOR THE DECREE OF
DOCTOR Of PHILOSOPHY
DEPARTMENT OF LAND DEVELOPMENT
FACULTY OF ARCHITKCTURF, DESIGN AND DF.VKLOPMFNT
UNIVERSITY OF NAIROBI
* RRRUARY
*
Tin- thesis xc W original work and has not been
^u^.i'.ea £or a degree in any other University.
MUHAMMAD A SWA2URI
f y * jV| ___
Uu* b.c/. >ul..uitted f *»: ex?-ir.ation v.th out--
i.* . . • ■'IS*
University Supervisors.
U rwv -t 1 as
Professor 3AAD S. VAHVA
a / / .
V(Vl-v ~
C T
PROPESSOF GEORGE K. KING*Or.Ah
1^96
ACKNOWLEDGEMENT
5nt o I t he gt'eats at difficult!®a on* endures
z*~rr going tnrough su'-h ? study is who to remember to
thank for any contribution they may have offered. It has
taken a time since this study was started, and there are
many people who contributed ’o its completion. The list
ce*rain?y Iona, In. m particular I wish to convey my
•hanks and gratitude for whatever help the following may
have contributed:
Hy dear family for having encouraged me
thioughout the study, staying far away from
them for long periods.
D.A.A.D. Office for their continued
sponsorship without whose help this study may
not have been fruitful.
The two serious supervisors, Profs. S.S. Yahya
and G.K. K m g ’oriah, who patiently went
through series of manuscripts.
Prof. Paul M. Syagga, whose guidance was most
helpful.
Fellow staif of the Department of Land
Developmen' -.n particular and the entire
A.D.D. in general.
The various icsearch assistants.
The many people interviewed and those who
li
v unf.'ri ; -1 irfc*im otx">i *n*>
Mir.r Maryavo? Ky?r.iu ChcAvn wnc . toyethr?
v/ith myself, *.yr*d '.ho vroi fc on the computer.
;xiil a ll • »* <• • w in m i/ v »y ••.olpad me but
i =»nn.M poar I1'!) tl‘ •ham - u y than'; ynv
a i.
1:1
Tiij• work if dedicated to
My i*te niothei 1ASIKA WINGI BOHANH
who did not live to enjoy
• he expected benefits from
Mas study.
ABSTRACT
Kenya is one of the coastal states that lie in the
eastern part of Africa. For a long time now Kenyan
valuation practice has been concentrated on land-based
resources. Valuation of farms, houses, offices,
Industrie? r. now pute familiar in everyday life
Howe , .1 "ri* v»" now becoming important in world
reaout :*•5 iffnin, nn a:oa .n which the valuation
piofees*.or n Kenya can also participate. This area is
the coastal ci marine env tcument, where many sectors cf
« .'i.ronv a- ti wap* rt and research ax*
new •nrrsii;ng,y turning Vo use. Whereas profession?*
. 1 1 n* Me? co'Jii.iie.e have • xpanded their scope into
* he«v “mv (onment' , the valuation profession in Kenya has
«e»i i'i realise i-s potential :n the same. And
because the full economic potential of the resources of
the Kenyan coast is not known with certainty it is
logical to carry out studies of their estimation.
Unlike land-based resources, waterfront properties along
the coastline possess somewhat peculiar characteristics
which imply that a free market or a purely price
competitive mechanism will not allocate these resources
properly. It is even worse for the methods of valuation
which can be employed in such cases. Identification and
v
explo_r.ntion of tc s c rv -* J ivo to be climaxed by irvpsr
m®r.hod«« of th^ir estimation to be worthwhile.
-w" n »* ible characteristic:; c£ the waterfront preperti*
iocst-'1'' a’.ong the Kenyon roastline are the extremities in
vaiueo of similar properties, sometimes even tn the vne
inr ■ M Arid the exclusive use of tho market
- comparison method tn ;uch property valuations. This
study contends that extremities m values have arisen
from th* use of Improper methods for valuing waterfront
properties. And the method being used currently in tho
valuation disregards a number of important factors, most
..>! which are difficult to quantify using the market
comparison method. This study aims, therefore, :c
pte^u.i* iifitte’ ways of valuing waterfront lands.
The vtiuit icu ot w.**-• fto*r. lands i; miuenced L, both
sice-oriented, such as view, size and non-site-oriented
variables like reasons for sale, date of transaction and
so on. Evidence from the valuation practices in the
study area suggests t lint only sito-oriented
characteristics of property are considered during
valuations and this loads to either under valuation ox
overvaluation of these properties. Although some factors
ar9 not directly on the property being valued, they are
actually significant influences of value, and
l i i : M J * U *i'i altogo her is not reasonable*.
vi
' n*tho<! proposed mi this study con u *. s >oth
•i*:? non sit*1 o»-en*:**d ! nctorn
1 > 'A • ■ ■ j' i1:n ■ 1 muitii •: • ’ irca ^ion AriaiysJir (CMRA) at
• !• •. • t .vfn hr»•« r !•.•»*• t - t ~noiro of value- inf lucncing
• * v>’a i »'••?! » cciontiric, mote reasonable and lets
• ;*>.-* • •• than in r he * m n a r y Comparison Method,
i f influencing virt’bits for valuation purposes iv
9 "oroRoary stop if props* values have to be estimated.
Many valuations hove hod * suits because of Inability *o
t <> •» r( t Ify p*.d m«* iKIlt *» factors*
;*pver?' rejt^ss^on methods of valuation have been tried
li, i r, n study, ’.anginj from the simple multiple
• *• ,tr s ion analysis to i ink transformation legreeoion.
v . i t hr. method* ! ac it*? r-erits and demerits, in most
•*sen in terms of their usefulness and accuracy in
valuing waterfront lands. Conventional Multiple
Regression Analysis (CMRA) and Rank Transformation
Regression (RTR) were found to be tho best of the lot,
accounting for 49t and 511 of the variation in property
values in the area respectively. However, RTR seems to
have the methodological problem of how to rank factors
affecting value beforo using them in the procedure.
While it is appealing and quite rational to rank factors,
the criteria to be use! to; the ranking is contentious.
CMRA was therefore, found to bo a 'better* method, it
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produced better ronults in tho various tests the models
underwent and can easily be understood and applied.
Using the same methods, it was found that SIZE of
property is the most important factor affecting value in
the study area. The larger the size, the higher the
value, although other factors such as width of the beach
area (AREA), VIEW of the ocean waters, availability of
water SPORTS on the beach etc, have also to be
considered. Furthermore, no single factor alone can be
used as the only basis for estimating values of
waterfront lands.
Despite the study advocating for tho uso of CMRA m
waterfront valuations, there are very few instances where
th»» valuer will not use some form of comparison in the
valuation process. Whether it is in tho choice of
independent variables or in the measurement of these
variables, the punciples of comparison have to be
utilised to arrive at objective values. Aftet il .
valuation is all about the market, and if the value?
disregards the market trends then his valuation will be
somewhat incomplete.
M A SWAZUR1
FEBRUARY 1995
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• TABLE OP CONTENTS
PAGE
TITLE ......................................... (0)
DECLARATION ................................... (i)
ACKNOWLEDGEMENT .................................. (li)
DEDICATION ....................................... (iv)
ABSTRACT ...................................... (v)
TABLE OP CONTENTS ............................... (ix)
LIST OF MAPS .................................. (Xiii)
LIST OF FIGURES .............................. (xiv)
LIST OF TABLES ................................ (xiv)
CHAPTER ONE : INTRODUCTION AND PROBLEM STATEMENT »
Introduction ..................................... 1
Problem Statement ................................ 5
Objectives of the Study ......................... 15
The Study Hypothesis ............................. 15
Scope of the Study ............................... 16
Research Methodology ............................. 18
Organisation of the Study ....................... 22
References ........................................ 23
CHAPTER TWO : COASTAL WATERFRONT PROPERTIES
Introduction ..................................... 25
The Properties Themselves and Their Essence .. 25
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