Residential property investments are frequently subjected to unpredictable
future, encompassing uncertainties and various forms of risks which impact
the anticipated level of returns that should compensate for the risks taken
by the investors. There are cases where appraised property investment
projects were abandoned before completion and some investors lose their
investments due to inability to repay loans sourced from credit institutions.
These issues have been as a result of the Estate Surveying and Valuation
Firms not employing probabilistic techniques in the appraisal of residential
property investment risks. The study appraised the factors influencing the
application or otherwise of probabilistic methods of risk analysis in
residential property investment with the view to proffer workable solutions.
The objectives of the study are: to ascertain if Estate Surveying and
Valuation Firms in Enugu metropolis are applying these techniques for
residential property investment appraisal; to analyse the factors influencing
the application of probabilistic methods of risk analysis. Survey research
design was adopted for the study. The population of the study comprised 49
Estate Surveying and Valuation Firms in Enugu Metropolis. A demographic
formula was used to determine a sample size of 44 firms which were
selected by purposive sampling technique. Data collected were analysed
using mean and standard deviation; hypothesis was tested using logistic
regression analysis. Findings from the study show that the Firms do not
adopt probabilistic methods of risk analysis; methods mostly applied were
risk adjusted discount rate (RADR) and sensitivity analysis. The degree of
sophistication involved with the methods and lack of computer software
packages are the factors influencing the non-application of probabilistic
methods of risk analysis. The Application of probabilistic methods of risk
analysis in residential property investment decision making will provide a
substantial level of professional shielding of investors from the ravages of
risks and uncertainties.
Nnamani, Obinna Collins. "The Application of Probabilistic Methods of Risk Analysis in the Investment Appraisal of Residential Properties in Enugu Metropolis, Nigeria." In 23rd Annual European Real Estate Society Conference. ERES: Conference. Regensburg, Germany, 2016.
Section: Africa Session