APPLICATION OF GEOGRAPHIC INFORMATION

SYSTEM IN PROPERTY VALUATION

Thesis

Presented by

STEPHEN WAKABA GATHERU

F56/69748/2013

Supervised by

DR. DAVID NYIKA

School of Engineering

Department of Geospatial And Space Engineering

University of Nairobi

BACKGROUND OF THE STUDY • Property valuation is the process of estimating property value

for a certain purpose, at a certain time based on the

property’s characteristics taking into account all factors that

can affect property value.

• In countries with personal ownership of real property, civil

law protects the status of real property in real-estate markets

and estate agents work in the market of buying and selling

real estate.

• This study will help identify these parcels of land and prepare

a database of parcels of land and their attributes using

Hedonic pricing method of valuation.

• Hedonic pricing model was suitable because it incorporates

most of the attributes a property possesses.

2 Thesis Presentation

PROBLEM STATEMENT • There are inconsistent sale prices and values for parcels of

lands since prices and values have not been changed over

time, which make it difficult for the local authority to charge

and collect rates.

• The property valuation process has been carried out manually

since the profession was introduced in this country and this

produces poor quality valuation

• Banks rely on property valuations to lend money to the clients

against the collaterals that have been valued. It is therefore

important that the values returned are accurate and reliable

• Reasons for poor quality valuation is lack of proper tools to

manage, maintain, explain, view, analyze and make optimal

decisions on the massive amount of data involved.

• GIS is a viable tool to solve this problem. It will enhance

timely data update and improve efficiency

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Thesis Presentation

OBJECTIVES • To create a Geodatabase of the parcels of land

and their attributes by GIS

• To identify attributes affecting land values

therein.

• To use Hedonic Pricing Method to test the

power of GIS method in property valuation

4 Thesis Presentation

METHODOLOGY ITEM DESCRIPTION

Research Design Descriptive Research Design

Study site Ruiru Kiu area of Ruiru Sub County of Kiambu County.

The area is between Thika road and The Eastern bypass

Population

The population of the study was 40 registered offices each with

10 land valuers, making a total of 400 target population.

Sampling Method Stratified Sampling

Data collection

instruments

Structured questionnaires were used as the main source of

primary data collection tools

Data processing

and analysis

•Descriptive statistics was done by use of SPSS

•Inferential statistics was regression and correlation analysis

•The Overall model significance was checked using analysis of

variance (ANOVA)

5 Thesis Presentation

A multivariate regression model

• Y =β0 + β1X1 + β2X2 + β3X3 + β4X4+ β5X5+µ

• Where;

• Y =Value of land (price)

• X1 = Zone (location)

• X2 = Size

• X3 = Accessibility to infrastructure

• X4 = Accessibility to other amenities

• X5= physical characteristics

• Source: Gundimeda, (2005): Hedonic price Monday, June 22, 2015 Thesis Proposal 6

Cont…..

• In the model, β0 = the constant term while the coefficient βii = 1….5 was used to measure the sensitivity of the dependent variable (Y) to unit change in the predictor variables X1, X2, X3 and X4. µ is the error term which captured the unexplained variations in the model.

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RESULTS-DESCRIPTIVE STATISTICS

Thesis Presentation 8

• From the hundred (100) parcels of land analyzed the maximum size was 1 hectare while the minimum size was 0.15 hectare

• The percentage of respondents who have parcels of land accessible to bypass for the period of study are 61%, while those who have lands close to the railway track are 66%. 53% have lands close to the shopping centre while 35% have lands close to the police station.

• 51% have land accessible to primary school while 66% have lands in the marshy areas.50% have rocky parcels and 60% have their lands fenced with a perimeter wall or live fence.

RESULTS-CORRELATION ANALYSIS

Thesis Presentation 9

• The value of land and the size of land are positively and significantly related (r=0.463, p=0.000).

• The value of land and accessibility to bypass are positively and significantly related (r=0. 582, p=0.000).

• The value of land is positively and significantly related to distance to railway track (r=0.289, p=.004),distance to the shopping centre (r=0. 394, p=0.000) and distance to the accessibility to primary school. (r=0.412, p=0.000).

…CONTINUED–CORRELATION ANALYSIS

Thesis Presentation 10

• Further the results revealed that the value of land is positively and significantly related to perimeter wall (r=-0.247, p=0.013)

• The value of land is negatively and significantly related to marshy areas (r=-0.358, p=0.000)

• The value of land is negatively and significantly related to rocky areas (r=-0.283, p=0.000).

RESULTS-REGRESSION ANALYSIS

Thesis Presentation 11

• The R square=0.517 meaning that the independent variables in the regression explain 51.7 % of the variations in the dependent variable(value of land)

• ANOVA results indicate that the overall model was statistically significant and the independent variables are good predictors of the value of land(F =10.698,p=0.000).There is a positive and significant relationship between the value of land and size of land, accessibility to bypass, and accessibility to primary school.(r=10.915, p=0.002), (r=6.621, p=0.000) and (r=2.827, p=0.021) respectively. Means that an increase in a unit change of the variables would result to an increase in the value of land.

RESULTS-HEDONIC PRICING MODEL (HPM) • The model included significant variables only

• The general model was

Market price of land (value of land) =f (land size, accessibility to bypass, accessibility to primary school)

• The specific model was

Market price of land (value of land) = 17.187 + 11.724 land size + 6.894 Accessibility to bypass + 3.095 Accessibility to primary school

Thesis Presentation 12

SUMMARY

• Geodatabase of the parcels of land and their

attributes was created by putting the values obtained in HPM in an attribute table of the shape file in ArcGIS, GIS software.

• Attributes affecting land values in Ruiru were found out to be size of land, accessibility to bypass, and accessibility to primary school.

• The attributes have a positive and significant relationship with the value of land

Thesis Presentation 13

CONCLUSIONS • Accessibility to the bypass, Land size, and accessibility

to the primary school are the significant attributes.

• HPM is more objective and consistent .It is not influenced by personal feelings and self appraisal, hence free from individual bias

• HPM is verifiable since people tend to arrive at the same value given the same attributes

• GIS is a superior tool that enables production of a value map because of its ability to allow for querying capabilities

• The method of valuation widely used to upraise property is the Sales comparison method

Thesis Presentation 14

Query and Results

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Value Map(per Parcel)

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Value map(per Hectare)

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RECOMMENDATIONS • HRM should be used in Valuation of Property

because of its ability to quantify scientifically the factors affecting Property values

• A centralized data bank be created capturing sales data and property characteristics

• Use of GIS in property valuation should be encouraged and introduced to all valuers because it will fasten decision making

• This method of valuation should be applied in other areas other than Ruiru

Thesis Presentation 18

THANK YOU ALL !

Thesis Presentation 19