A Hedonic Pricing Model on Factors that Influence Residential Apartment Rent in Abuja Satellite Towns

Abstract

In this paper, we propose the hedonic price model to tracks the dynamics that influence rent apartment price in three satellite towns in FCT Abuja. The premise that rent apartment prices are influenced by a combination of attributes was tested with a standard hedonic model using a sample of 289 rent apartment in three satellite town (Bwari, Karshi and Kuje). Out of the seventeen explanatory variables used in the analysis, about ten of them show positive signs of considerably impact on rent apartment price. Variables like lot size (LOTSZ), room size (ROOMSZ), number of rooms (NUMRMS), number of bathroom/toilet (NUMBRMS) major access road (MAROAD), presence of government establishment (GOVTEST) were statistically significant at 1% and 5% significance level. The findings in this work suggest that satellite towns can be classified into two groups; established and growing satellite towns. Established satellite town implies that very few of these hedonic variables actually influence rent price, except for variable like LOTSZ and ROOMSZ which are common to all satellite towns in the study area. Growing satellite towns are those that more hedonic variables influence rent apartment price. Examples of growing satellite town are Bwari, Karshi and Kuje satellite towns. The population influx in the FCT is probably is the cause high rent apartment price being greatly influence by LOTSZ than any other variable. It is further suggested that hedonic research be employed to measure the growth rate of satellite towns in terms of locational and neighbourhood characteristics.

Keywords: Hedonic model, Residential apartment, Rent, Abuja