| dc.description.abstract | The valuation of waterfront properties along the coastline of Kenya
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, industries etc. are now quite familiar in
everyday life. However, a "new" era is now becoming important in
world resources affairs, an area in which the valuation
profession in Kenya can also participate. This area is the
coastal or marine environment, where many sectors of the economy
such as energy, transport and research are now increasingly
turning to use. Whereas professional valuers in other countries
have expanded their scope into these environments, the valuation
profession in Kenya has been slow to realise its potential in 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 exploitation of resources have to be enhanced
by proper methods of the resources' estimation for them to be
worthwhile.
Two notable characteristics of the waterfront properties located
along the Kenyan coastline are the extremitie in values of
similar properties, sometimes even in the same localities, and
the exclusive use of the market comparison method in such
property valuations. This study contends that extremities in
values have arisen from the use of improper methods for valuieing
waterfront properties. And the method being used currently in
the valuation disregards a number of important factors, most of
which are difficult to quantify using the market comparison
method. This study aims, therefore, to present better ways of
valuing waterfront lands .
.The valuation of waterfront lands 1.'3 influenced by both site-
oriented, such as size and non-site-oriented variables like
reasons for sale, date of transaction and so on. Evidence from
the valuation pr ac t i.ce s in the study area suggests that only
site-oriented characteristics of property are considered during
valuations and this leads to either under valuation or
overvaluation of these properties. Although some factors are not
directly on the property being valued, they· are actually
significant influences of value, and disregarding them altogether
is not reasonable. The valuation method proposed in this study
considers both site and non-site oriented factors.
Using conventional multiple regression analysis (CMRA) it has
been shown here that the choice of value- influencing variables
is more scientific, more reasonable and less subjective than in
the ordinary Comparison Method . Choice of influencing variables
for valuation purposes is a necessary step if proper values have
to be estimated. Many valuations have had faults because of
inability to identify and measure these factors.
Several regressiGn methods of valuation have been tried in this
study, ranging from the simple mul tiple regression analysis to
rank transformation regression. Each of- the methods has its
merits and demerits, in most cases in terms of their usefulnes
and accuracy involving waterfront lands. Conventional Multiple
Regression Analysis (CMRA) and Rank Transformation Regression
(RTR) were foun.d ·to be the best of the lot, accounting for 49%
and 51% 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 before using them
in the procedure. While it is appealing and quite rational to
rank factors, the criteria to be used for the ranking is
contentious. CMRA was, therefore, found to be a 'better' method,
because it produced better results in all the various tests the
models underwent. For example, CMRA had a relatively high R2 of
49.1%, a relatively low MSE value of 13612 and the smallest Cp
value of 277. CMRA's ability to rank the independent variables
within itself during analysis can easily be understood by both
the valuer and client, and is applicable in practice.
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 the use of CMRA in waterfront
valuations, _there are very few instances where the valuer will
not use some form of comparison in the valuation process.
Whether it is in the choice of independent variables or in the
measurement of these variables, the principles of comparison have
to be utilised to arrive at objective values. After all,
valuation is all about the market, and if the valuer disregards
the market trends then his valuation will be somewhat incomplete. | en |
