The effect of ground rent and unexpired lease term on property values in Ghana

Gyau, KAB; Gyamfi-Yeboah, F

Abstract

Purpose:
Although several factors influence property value
determination depending on the market, relevant
studies in Sub-Saharan Africa (SSA) often fail to analyse
the impact of factors, such as unexpired term of
leasehold interest and ground rent, which are also
germane to market transactions and value
determination. This study examines the effect of
unexpired term of leasehold interests and ground rent
on the valuation of residential properties in Ghana.
Design/Methodology/Approach:
A questionnaire instrument was used to collect the
views of a sample of professional real estate valuers on
the relevance of these and other factors that affect
value. In addition, the valuers were tasked to value a
residential property located in Accra, Ghana. OLS and
Quantile regression models were thereafter used to
analyse the data to determine the effect of the subject
variables on value.
Findings:
The study finds a significant relationship between
valuers’ views on the relevance of unexpired term of
leasehold interest and the value placed on residential
properties. Further, the respondents who viewed
ground rent as an important factor in estimating values
placed significantly lower values than those who viewed
it as less important.
Research Implications:
The findings suggest that the respondents may have
split opinion on the existing anecdotal evidence that market participants ignore the unexpired term of
leasehold interest, an issue that should be settled in
theory. The findings also highlight the diversity of
opinion on some of the fundamental factors that affect
value and the need to build consensus to prevent
excessive variation in value estimates among valuers.
Originality:
The study makes a significant contribution in terms of
extending the existing literature by analysing the impact
of unexpired term of leasehold interests and ground
rent on residential property values based on empirical
data, issue(s) which have often been ignored by existing
studies. Findings from the study also provide insights
into additional possible causes of valuation errors in
Ghana and SSA, which are useful for policy formulation
and practice.
Keywords: Effect, ground rent, leasehold, residential, unexpired lease term, valuation

Citation

Gyau, K., & Gyamfi-Yeboah, F. (2019). The effect of ground rent and unexpired lease term on property values in Ghana. International Journal of Housing Markets and Analysis, 12(3), 504-524. https://doi.org/10.1108/IJHMA-05-2018-0033

• Journal Article Type: Article
• Acceptance Date: Jul 15, 2018
• Online Publication Date: Apr 3, 2019
• Publication Date: Apr 3, 2019
• Deposit Date: Jul 20, 2018
• Publicly Available Date: Apr 3, 2019
• Journal: International Journal of Housing Markets and Analysis
• Print ISSN: 1753-8270
• Publisher: Emerald
• Volume: 12
• Issue: 3
• Pages: 504-524
• DOI: https://doi.org/10.1108/IJHMA-05-2018-0033
• Publisher URL: https://doi.org/10.1108/IJHMA-05-2018-0033
• Related Public URLs: https://www.emeraldinsight.com/journal/ijhma
• Additional Information: Projects : Evaluation of Property Valuation Practice in Sub-Saharan Africa