The Impact of Depressed Economy on Real Estate Finance
Chapter One
OBJECTIVE OF THE STUDY
The objectives of the study are;
- To examine the impact of depressed economy on real estate financing.
- To observe how finance can be acquired and the variety of financing that is appropriate to real estate development.
- To examine the tool used in financing of real estate and steps to take to sourcing for real estate finance.
CHAPTER TWO
REVIEW OF RELATED LITERATURE
ORIGIN OF GLOBAL FINANCIAL CRISIS
The crisis began in the United States of America and spread to Europe and finally engulfed other parts of the world. Most analysts agree that the closest point of origin of the global financial crisis the collapse of the US real estate market in 2006 and the subsequent subprime mortgage crisis triggered by a dramatic rise in mortgage delinquencies and home foreclosures by 2007. The high failure rates of the sub-prime mortgage were, however, just the symptom of the end to a long period of credit boom in the United State. Thus, analysts believe that the ultimate point of the origin of the global financial and economic crisis can be traced to an extremely indebted US. Economy supported by a long regime of easy credit (Stiglitz, 2008). The term Global financial crisis is used to refer to situations in which some financial institutions or assets suddenly lose large proportions of their value. Global financial crisis are usually associated with banking panics, stock market crashes and the bursting of other forms of financial bubbles, currency crises and sovereign defaults. The term economic crisis is used to refer to broaden systematic problems in the real sector of the economy. Economic crisis is usually associated with a general slow down in economic activity over a sustained period of time. Such a slow-down may be called a period of economic stagnation, a recession or a depression. A long period of economic slow-down that is not characterized by negative growth is regarded as a period of economic stagnation. A period of negative GDP growth lasting up to six months or more is called a recession while a prolonged period of economic recession is called a depression. Key macroeconomic aggregates such as, GDP, growth, employment, investment spending, capacity-utilization, household incomes and business profits usually record decline during a recession. 19 It is called a global financial crisis because it has brought about huge reduction in global output and employment as well as diminished cross-border financial flows. It is indeed a crisis that has global outreach in the sense that no country has been spared its consequences. It has manifested like a virus attack on critical sectors of most national economics, often starting from the financial sectors and spreading to real sectors, leaving in its trial huge declines in output and employment with attendant consequences on poor and vulnerable groups. (Anyanwu, 2009).
NATURE AND TYPES OF GLOBAL FINANCIAL CRISIS
According to Soludo (2008), global financial crisis may be triggered by variety of factors, but the situation is typically aggravated by negative investor sentiment-fear or panic. The global financial crisis can be categorized into five types namely;
Banking Crisis
This is triggered by a sudden withdrawal of bank deposits by several clients, a situation known as bank run. Banks may not have sufficient funds to simultaneously pay back numerous depositors, since they loan their funds. This credit crunch situation impacts the economy, as its affects production as well as consumption.
Bursting of a Bubble
Financial bubbles are caused by the over valuation of assets, with prices exceeding with current value of the future income expected to be generated by these assets. Bubbles are doomed to eventually burst, with crashing prices.
Currency Crisis
A country that maintains a fixed exchange may have to suddenly devalue its currency. This often leads to a sudden drop in foreign investment.
Sovereign Default
A government may fail to repay its sovereign debt. This often leads to a sudden decline in capital inflows and a spike in capital outflows.
Wider Economic Crisis
An economy may go through period of slow or negative GDP growth. While slow economic growth may be called economic stagnation, negative GDP growth for more than a couple of quarters is recession. A prolonged recession is called depression (Eboh, 2010)
REAL PROPERTY
The Oxford Advanced Learner‟s Dictionary, the fourth edition (1989, p. 1044) expresses the term real property as: immovable property, consisting of land, buildings, etc. Real property includes land as well as buildings and other material improvement on it and legal right relating to these assets. There are many types of real properties. Each type is also made up of separate sub-categories. Real property can be classified according to their ownership, use and physical form. These classifications are Commercial, Residential, Industrial, Agricultural, Recreational, Building Land, Mineral Properties, etc. There are two broad divisions of property. The first is Real Property also called Realty. This refers to land whether developed or undeveloped. This was the main known form of property over the ages.
CHAPTER THREE
RESEARCH METHODOLOGY
Research design
The researcher used descriptive research survey design in building up this project work the choice of this research design was considered appropriate because of its advantages of identifying attributes of a large population from a group of individuals. The design was suitable for the study as the study sought to the impact of depresses economy on real estate finance
Sources of data collection
Data were collected from two main sources namely:
(i)Primary source and
(ii)Secondary source
Primary source:
These are materials of statistical investigation which were collected by the research for a particular purpose. They can be obtained through a survey, observation questionnaire or as experiment; the researcher has adopted the questionnaire method for this study.
Secondary source:
These are data from textbook Journal handset etc. they arise as byproducts of the same other purposes. Example administration, various other unpublished works and write ups were also used.
Population of the study
Population of a study is a group of persons or aggregate items, things the researcher is interested in getting information on the impact of depresses economy on real estate finance. 200 staff of selected estates in Osogbo, Osun state was selected randomly by the researcher as the population of the study.
CHAPTER FOUR
PRESENTATION ANALYSIS INTERPRETATION OF DATA
Introduction
Efforts will be made at this stage to present, analyze and interpret the data collected during the field survey. This presentation will be based on the responses from the completed questionnaires. The result of this exercise will be summarized in tabular forms for easy references and analysis. It will also show answers to questions relating to the research questions for this research study. The researcher employed simple percentage in the analysis.
CHAPTER FIVE
SUMMARY, CONCLUSION AND RECOMMENDATION
Introduction
It is important to ascertain that the objective of this study was to ascertain the impact of depressed economy on real estate finance
In the preceding chapter, the relevant data collected for this study were presented, critically analyzed and appropriate interpretation given. In this chapter, certain recommendations made which in the opinion of the researcher will be of benefits in addressing the challenges of depressed economy on real estate finance
Summary
This study was on the impact of depressed economy on real estate finance. Three objectives were raised which included: To examine the impact of depressed economy on real estate financing, to observe how finance can be acquired and the variety of financing that is appropriate to real estate development, to examine the tool used in financing of real estate and steps to take to sourcing for real estate finance. The total population for the study is 200 staff of selected estates in Osogbo, Osun state. The researcher used questionnaires as the instrument for the data collection. Descriptive Survey research design was adopted for this study. A total of 133 respondents made up managers, secretaries, security men and junior staff was used for the study. The data collected were presented in tables and analyzed using simple percentages and frequencies
Conclusion
This research study concludes that real estate investment if explore it will create reliable return to the investment owners, the benefits that can be derived from real estate investment has been revealed by this study. This study has shown that government policy should be enacted to create more viability to the business. The study also postulated that economy of a nation can be enhanced if property markets are well coordinated. It also concluded that building materials should be manufactured locally so that the cost would be minimized. The study also highlighted that private developers are key important for real estate investment in Nigeria. The conclusion drawn by this research shows that real estate investment has a capacity of transforming economic hardship in the country.
Recommendation
An unmaintained property portfolio causes management problems for the Property Manager. Nigerian Institution of Estate Surveyors and Valuers should be engaged on massive enlightenment programmes to educate property owners on the need to make provisions for maintenance services. The Institution should also sponsor a bill restricting the operation of quacks because most of the property owners in the study area cannot differentiate a professional Property Manager from a quack
REFERENCES
- Adebiyi, C.O. (1986). The Property Manager in Private Practice. A Paper presented at a Workshop, organized by the Nigerian Institution of Estate Surveyors and Valuers, Lagos, Nigeria.
- Adu, D.B. (2004). Comprehensive Mathematics for Senior Secondary Schools. Lagos, Nigeria: A. Johnsons Publishers Limited.
- Akagha, S.U. (1981). “Property Management in Practice.” The Estate Surveyors and Valuers, Vol. 5, No. 1, July Edition, Lagos, Nigeria.
- Dasso and Ring, (1979). Real Estate Principles and Practice. New Jersey: Prentice Hall, Inc. Economy of Nigeria. Retrieved July 1, 2008, from http://wikipedia.cas.ilstu.edu/index.php/Economy of Nigeria.
- Hornby, A.S. (1991). Oxford Advanced Learner‟s Dictionary. Oxford, Great Britain: Oxford University Press.
- Iloabuchi, K.E.O. (2000). Principles of Property Management. Lecture Notes at the Department of Estate Management, University of Nigeria, Enugu Campus, Nigeria
- Kyle, K. (1983). Property Management. U.S.A: Real Estate Education Company. lxxxvii
