The influence of flood risk on investment decisions in the Lagos residential property market

Oyetunji, Abiodun Kolawole and Ilic, Suzana and Markusson, Nils (2022) The influence of flood risk on investment decisions in the Lagos residential property market. PhD thesis, Lancaster University.

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Property is a term that is used to describe land in bare form or developed with buildings. Both are alternatively described as landed property. They are highly sought after as investments due to their income potential and capacity to deliver the level of returns that are acceptable to investors. There is a tendency for landed property to be scarce and also in high demand, particularly in the most desirable locations. As a consequence, it is not unusual for investors’ in real estate investments to gravitate towards areas that could pose a significant risk to human life and property. One such area is an environment where flooding has been known to occur and could reoccur in the future. Also, there are areas where flooding has never occurred, but may yet occur. These areas are also described as flood risk areas or flood zones. Floods are becoming increasingly common due to a number of natural and man-made causes, including urban expansion. Despite this fact, building developments and property investments in flood zones continue around the world. This research aims to investigate and understand how perceptions of flood risk are formed and how they, among other factors, may influence private investors’ decisions on residential properties investment within Lagos metropolis, Nigeria. Two local government areas, Ibeju Lekki and Ikorodu, were chosen as the study sites. These areas were selected due to their known flood risk characteristics and the hydrological predictions of the Nigerian meteorological agency as well as being highly populated areas in ever-expanding Lagos. A detailed investigation was then carried out using a mixed-method approach, that involves questionnaires and interviews with private investors and estate agents. Findings from the survey showed that the predictive factors (locational, neighbourhood, structural, market or economic, risk, and behavioural attributes) were deemed important. However, precise property location and infrastructure factors (electricity and transportation) were perceived as the most important factors influencing property investment decisions. Flooding in an investment location can negatively affect the investor’s income which is crucial to his decision to invest. This suggests that flood risk should be an important consideration in property investment decisions. There is a need for investors’ to be informed about this risk, but respondents disagree about the reliability and usefulness of flood risk information sourced through social media. The results also show that insurance and flexible lease terms to protect investors’ may not be easy to implement. Recommendations were made concerning how decision-making on property investment could be improved in the light of the findings. One way is through a greater availability of flood risk information and its effective communication amongst investors. This would lead to better decisions which would reduce losses from floods in both material and human terms. It would also guide investors on how to invest to advantage by having an understanding of the features which improve the desirability, usability and marketability of investments located in flood risk zones. Future research may evaluate flood risk perceptions amongst other groups of property market stakeholders and other property investment sub-markets in Nigeria and other countries since property markets are local in nature.

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Thesis (PhD)
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03 Oct 2022 15:10
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15 Dec 2023 11:35