World Journal of Civil Engineering and Construction Technology

Vol. 4(1), pp. 064-078, June, 2020. © www.premierpublishers.org. ISSN: 1936-868X

Research Article

Factors Determining the Continuous Price Appreciation of Units in Addis Ababa

Hemen Melesse Lecturer, Department of Land and Real Valuation, Dire Dawa University, Dire Dawa, Ethiopia Email: [email protected]

The rapid growth rate of Addis Ababa’s population has resulted in a growing demand for residential housing. Hence, the Ethiopian government reacted to launch condominium program to improve the housing problems of the poor. However, the continuous appreciation of this condominium transaction price and unaffordability of the units for the poor were some of the challenges to this housing program after transfer. This study aimed to explore the major factors responsible for price appreciation correlated to the demand. Descriptive research method and mixed research approach have employed on three pilot study areas through, purposive selection focusing on two municipal districts in Addis Ababa. Both primary and secondary sources of data were used by means of questionnaires, interviews and a review of relevant documents. The OLS estimators have resulted highly statistically significant for the expected variables of year, area and location in determining the price suggesting further contributing factors from the actual findings. Actual findings thus identified; lack of information, illegitimate role of brokers and monopolistic housing supply as major determinants. Finally, this study has recommended passing regulations and directives can minimize the incremental rate of the condominium transaction price considering all the challenging factors of the sector having clear and reasonable valuation methods.

Keywords: Condominium, Determinant factors, Housing Demand, Price Appreciation, Transaction, Poor

INTRODUCTION

Housing is one of the necessities for human survival, due (K., Frank, 2017). Other than the demographic issues, to the stagnant nature of the property; effective housing interest rates, the economy, government policies and delivery has been difficult for governments to fulfill the subsidies also determine a market (Sisay, Z., need of their residents. Thus, it is considered as one of the 2014). sectors that serve as a tool to address poverty and bring sustainable development (UN-HABITAT, 2003). In Since Ethiopia could not cope with the fast-increased need accommodating some section of the society, Governments for the last four decades, the Ethiopian government have housed some of their own employees like their involved in the supply of vertical communal housing called Armed forces and University Teachers. a condominium. This has initiated by Addis Ababa City Administration with a new site expansion and After time being, the growing population became the redevelopment approach (MoWUD, 2006), aimed at strongest underlying reason for huge demand in affordability-based supply and owner-occupied accommodation and real estate across the condominium units considered to address the insufficient developing countries. According to (John-Paul (founder housing and improved lifestyle of the pro-poor urban and head of small starter Africa), “Africa is the hottest dwellers. According to (UN-HABITAT, 2010), this program property market in the world”). Sub Saharan Africa’s has first contributed to progress towards an improved largest cities are currently some of the fastest- growing housing market by legalizing housing supply, stop illegal urban areas in the world. This is already creating development and increased the number of official property shortages and a considerable impact on property prices titles on land in Addis Ababa.

Factors Determining the Continuous Price Appreciation of Condominium Units in Addis Ababa Melesse H. 65

In other way, the middle-class communities have faced o To compare condominium housing transactions with problems associated with the absence of sufficient land other provision that excluded from valuation for land and necessary construction instruments supply like, cements and metals limited below the required level. RESEARCH METHODOLOGY Moreover, buildings under construction were always taking too long and construction capacity of the country was Addis Ababa is the capital city of Ethiopia, the seat of the limited to meet the required level of demand, poor African Union (AU) and the United Nations Economic borrowing capacity and as a result of lower per capita Commissions for Africa (UNECA). It is situated between income and their earning capability, the low and middle 8055' and 9005' North Latitude and 380 40' and 380 50' income earners have been wiped out from the loan market East Longitude in the central plateau of Ethiopia. Addis (Zerayehu, S. and Kagnew, W., 2015). Ababa is a chartered city having three layers of government: city government, sub-city administrations, Following to the intolerable fact of the down payment and and district (Woreda) administrations. The city interested overdue along the poor, the Government has administration divide Addis Ababa into 10 sub cities and permitted transfer to the third person assuming; if one hundred seventeen woreda administrations. beneficiaries had the financial capacity to meet their mortgage obligations. However, this has led to the Currently Addis Ababa became a just one center for CBD unexpected and unforeseen active transaction of the and Polycentric or located multi small centers. Expansion property synergic by high-value rent and sell; that lead to is behind the demand of housing and the provision of high space demand and uncontrolled price appreciation. public and other industrial developments on the level of parks. Since the government has introduced Several studies have also examined and investigated on national condominium housing program in 2005, Addis the Problems and prospects of housing development and Ababa city Administration has transferred 175,000 units by in Ethiopia. As (Abraham, 2007), 13 years (Yared, T., 2018). concluded that in this transaction there is unless, an accumulated demand for residential housing and otherwise, the low supply of residential housing had pushed prices. According to Addis Ababa city development office, in 2011 above 52 percent of the total population of Addis Ababa, earns below the least scale of the salary of the civil servant. This becomes a constraint to the low and middle-income residents to pay the down payment. Correspondingly, (Bereket and Nigatu, 2015) in their study found out that some households could afford with less than a quarter of their income, some might not possibly afford housing-while others had the ability to afford more than quarter and even more without hardship on the transaction.

Because of the above inspection, limited researches were conducted to identify the determinants of price more particularly on condominium transaction. Instead, most of the present studies mainly assessed Governments’ transfer price, affordability, transparency and other social phenomena. Thus, this study intended to fill the knowledge Map 1: Location Map of Addis Ababa and the selected gap associated with identifying factors who are Bole and Lideta sub cities responsible for the incremental sale price in Addis Ababa condominium housing transaction, with regard to the consecutive socio-economic problems. Specifically, the MATERIALS AND METHODS study aims: Condominium housing has mainly and firstly, tested in o To identify market contributing factors of the Addis Ababa city both functionally and economically of the condominium units. city could not manageably address the increasing amount o To evaluate factors to the price appreciation in of demand for housing due to the growing population. The condominium housings study also tried to select Addis Ababa as a potential o To assess the demand shift factors of housing to information area regarding to institutions such as condominium properties Economic ministry, National Bank, Housing Administration and Real estate agencies. Detailed selection has

Factors Determining the Continuous Price Appreciation of Condominium Units in Addis Ababa World J. Civ. Engin. Constr, Techn. 66

employed on the action areas under 2 sub cities that were Secondary data for the study mainly used on macro- mainly practiced in their several typology and bases of economic indices in Addis Ababa from the period 2009 – inner-city development and mostly offering agricultural 2019. These macro-economic indices were seen land for a new expansion. according to inflation rate on the consecutive years, the increased rate of price and condominiums interest rate. Bole and Lideta subcity; specifically, Bole Gerji, Bole Most of the information pertaining were obtained from summit II and lideta condominiums. Bole Gerji was a previous survey, literature and annual reports from various relatively small pilot project on a brown-field site and led institutions such as; Growth and Transformation Plan, by GTZ with (G+2) typology in 2008. Bole summit; the first National bank report, registration contracts and transaction grand project built on the edge of the city in 2014 (G+4) contracts. typology and Lideta was an inner-city upgrading project that was the first project to use a ground floor plus seven As a result, and analysis stage, triangulation method has storeys (G+7) condominium typology. used to analyze the data from different sources. This has employed by organizing the data through the identical ideas from the quantitative and qualitative documents to make the study more reliable, this data had refined by analyzing the data using Statistical Package for Social Science (SPSS), STATA version 15.0 for Windows (Stata Corp. College Station, TX, USA). Moreover, multiple regression analysis (MRA) techniques have used as multiple factors in calculating the analysis separately to quantify the impact of numerous influences upon a single dependent variable. Every single factor has calculated by Figure 1: Common Spaces in Lideta condominium its average index respect to a few levels of influence under respondents’ opinions. The index will then treated as influencing the level of the factors.

Model Specification

Multiple Regression can incorporate general functional form relationships as well as it allows for much more flexibility. The method of ordinary least squares (OLS) regression model employed. Based on the sampled data, the study employed over quantitative method on both Figure 2: Gerji condominium site response and control variables. Thus, there was data of 37 sold condominium residential units taken from the three condominium sites with their full information and analyzed by using the multicolleniarity test using linear regression analysis among the following factor variables

Equation 1: Log (House Price) = 훽0 + 훽1 퐿표푐푎푡푖표푛 + 훽2푁푢푚푏푒푟 표푓 푏푒푑푟표표푚푠 + 훽3 푌푒푎푟 + 훽4 퐼푛푡푒푟푛푎푙퐹푙표표푟퐴푟푒푎 + 훽5 푆푡표푟푒푦푇푦푝푒 + 훽6 퐼푛푓푙푎푡푖표푛 + 훽7퐼푛푡푒푟푒푠푡푟푎푡푒 + 푒 Source: Reference: (Gujarati , 2004) Figure 3: Summit condominium

Purposive Sampling method has employed on the primary RESULTS AND DISCUSSION data collection method to select respondents. Questionnaire survey, interview and discussions. Two Pilot survey types of questionnaire has provided, one for the target population of household in the selected condominium units Demographic features occupants and other to the selected institutions. Structured interview as well as key informants interview has provided to get The main determinants of demand in the housing market clear issues and address the question on both the dwellers relate with demographic factors. However, factors such as and professionals to share their first-hand knowledge and income, availability of credit, and customer preferences experience on the market encounter. Moreover, Focused are also important. Demographic factors include the size group discussion has made between the major housing of the market because the more the consumers, the higher Administration officials. the demand, as well as the rate of marriages, divorces and

Factors Determining the Continuous Price Appreciation of Condominium Units in Addis Ababa Melesse H. 67 deaths, which provide an idea of the population growth. Table 1: Demographic characteristics of condominium This growth is the strongest underlying reason for huge housing respondents demand for accommodation and real estate properties s/no Variables Variable category Percentage across the developing countries (K., Frank, 2017). (%) Similarly, (Sisay, Z., 2014) and (D.B. Animansa and G., Civil servant 29.0 Danimi, 2014) in their findings, the other demographic Private 63 factors are family size, Age, migration and life-cycle stage 1. Income Other 8 are the supportive factors for the demand of living in Total 100.0 condominiums. Furthermore, there are various Illiterate 24.7 demographic and socioeconomic changes of the city High 2.2 during the last decades influencing to create the 2. Education level school/certificate condominium property market. Particularly, well-educated, Degree and above 73.1 middle-income earning people who migrated to the city for Total 100.0 various reasons have raised the demand for low-rise Relocation 6.5 condominiums while foreigners and the affluent ones have Purchase 21.5 raised the demand for high-rise condominium property Rent 68.8 Occupation considering the security, convenience and location. 3. Lottery 1.1 Others 2.1 According to this study in the income category, above 29% Total 100.0 of the respondents were civil servants, 63% of them work Studio 22.6 in private organizations and self- employed and nearly 8% 1bed room 35.5 were with other sources of income. 4. 2bed room 22.6 Number of 3bed room 19.4 bedrooms Total 100.0 no child/family 29.0 1-4 53.8 Family size 5. 4-7 17.2 Total 100.0 No 30.1 6. Amenities Yes 69.9 Total 100.0

According to the government officials’ perspective, Figure 1: Pie chart of occupation Condominium program aimed at targeting lower-income groups but the current occupation was from better income individuals with higher prices. Evaluations showed that this price was more than twice the transfer one. It does not compare with the income of dwellers and the construction cost.

Figure 5: Pie chart of income level

From the questionnaire survey, occupation specified about 6.5% from relocation, 21.5% purchase and 69% from rent and others. As the number of rooms inspection showed that, about 22.6 % of respondents lived in a studio, 35.5% in 1 bedroom, 22.5% in 2bed rooms and 19.4% in 3 bedroom units. This shows more of the people prefer a 1 bedroom unit indicating small family size (i.e. a new bridegroom and no child), about 29% had no child or Figure 6: Chart on Condominium transfer, rent and family, 53.8% were from 1- 4 children and the rest of 17.2% average resale price change on a one-bedroom unit from of the household had up to 7 families with large in size. On 2009 - 2019 the final variable amenities, the total respondents about Source: (allaboutEthio.com by Mengistu, T., 2018) 70% were accessible to amenities and the rest 30% were (ezega.com by Samson B. 2015) in lack of amenities.

Factors Determining the Continuous Price Appreciation of Condominium Units in Addis Ababa World J. Civ. Engin. Constr, Techn. 68

The Demand and Supply Factor to House Price % of the dweller purchased a unit by 15,625$ – 40,625$, about 20% from 43,750$ - 78,125$ were purchased, the As (D.N. Dwivedi, 2010) inspected that, the main rest 8% could have purchased above 78,125$ - 93,750$. determinants of demand for housing are demographic but The units were rented from 94$ - 469$, above 60% of the other factors like income, price of housing, cost, consumer units from 94$ - 188$, about 35% from 188$-313$, the rest preference, investor preference, price of substitutes and 4.5% were rented the unit from 10,000$-15,000$. The third price of complements, all play a role. According to category, relocated ones shown that government’s sell (Arvanities, Y., 2013), More than often, studies on housing price is based on the integrated units that have transferred markets tend to focus on the demand side, and in including the 12th round transfer price in 2019 counting the particular the mortgage market. The real estate developers 6.5% interest rate. have a higher capacity to execute projects as well as to bring well-built units at reasonable costs into the market is Based on the interview results, there were also differences a key determinant of housing supply. Real estate between the transfer price and the current transaction, For developers in East African countries found to lack example as the price of transfer for 20/80 studio typology experience, which usually comes with a lack of record of in which one small room as a dining, living, and bed, was accomplishment thus making financing more difficult. This transferred for 5,156$ but they would have sold up to often induces a degree of execution risk. Lack of access 46,875$. Another 10/90 typology with an amount of 2,500$ to finance for developers means they must resort largely would have sold up to 25,000$ which was about 10 times to pre-sales in order to sector cash flow. Any delay in that of the transfer price. It does not compare with the payments, or difficulties to sell on plans puts developers in income of dwellers and the construction cost. On these a difficult position to keep projects within expected time transactions, the highest benefit was for the lucky lottery schedules as well as within budget. winners than people relocated because they were savers from earlier that made it easy for them to pay the loan. Accordingly, condominium units in the city showed that Therefore, from the result, the relocated ones were more selling price ranges from 15,625$ – 93,750$ and about 72 sellers than the lucky lottery ones.

Table 2: The transfer price (cost) of condominium housing units by the Government from year 2012 - 2019 Item 2012-2016 (7thth - 9th round) 2016-2018 (10th-11th round) 2019 (12th round) Down Monthly Total Down Monthly Total Down Monthly Total payment Payment Payment payment Payment Payment payment Payment Payment Studio 348 - 1510 617 22.5 3086.46 - 82.7 - One bedroom 604 - 2740 1170 43.6 5850.8 - 114.6 - Two bedroom 1201 - 5607.8 2199 90.9 10,982.3 - 146.5 - Three bedroom 1460 - 6849.3 3179 131.9 15,894 - 159.2 - Source: (AAHAA, 2018)

According to Housing Administration, not the demand but demand towards these condominiums. This shift was due housing supply is the reason to the rise in price, and other to brokers’ involvement in getting benefits on the real estate developers holding a wider area afterward they condominium properties, government flexible sell the land with added price, this made the price to management and lack of control. Land value and increase. Even the main accelerators on the supply and dynamics of raw materials price for construction were also demand space market may be mainly the bank and the the reason for the fluctuation. dwellers used for these units and there stands disequilibrium between demand and supply. Moreover, Marketability Factor The reason for this problem was not only the construction price but also variety costs were added including waste Demand is the buyer’s intentions and plans with respect to costs such as corruption cost, mismanagement cost, delay the purchase of a product with a specific time. The law of cost, etc. so the current condominium demand volume demand has also stated that a relative price of one good shift factors were corruption, mismanagement, wastage of rise, fewer goods would have bought. In the case of real materials, delay of construction, labor and bank interest. estate; housing price confides in the law of supply and demand. When demand for property remains high but About 50% of each officer respondents from different scarce in quantity, prices skyrocket. However, real estate offices said that government finance and inflation were the trends focus on the business and structural changes reason for the transaction price and instability. Therefore, affecting the industry, this is from the case of the dweller's income + selling price + government finance neighboring country (Muli, 2012). These factors were the factors for customer demand. Moreover, about were affecting to influence the demand upturn of housing 78% of the professionals agreed with the demand for rental in the short run, such as the shift from D0 to D1 there by units and inflation factors on the resale price by shifting either a price or quantity adjustment or both. For the price

Factors Determining the Continuous Price Appreciation of Condominium Units in Addis Ababa Melesse H. 69

stayed the same, the supply of housing would increase. neighborhood structures with in metropolitan areas; in That is, supply SH0 would have increased by HS. If the turn, it has a higher impact on the valuation of structural construction cost increase, CCo-CC1 developers find their attributes on the preference of customers. business less profitable and they were more selective in their ventures. Some developers may also leave then the As (Aluko, O., 2011) and (J, Jayalath, 2016) revealed that, quantity decreased, which eventually decreases the neighboring factors has s a higher impact on the valuation supply then prices tend to rise. of properties on the preference of customers. Community attributes has related to availability of schools, universities, According to (D.N. Dwivedi, 2010) states, market needs an religious palaces, court ordered service and so on, are easy to enter and exit, perfect competition and higher affecting the market value of the condominium properties. interest rates that the majority of customers do not affect Moreover, availability of institutional facilities, social by the higher interest rate; but as a result of the existed organizations and recreational facilities are community monopoly, the only seller could maximize profit especially factors that affect market value of a property. for the stockbrokers. Monopoly pricing was practiced as a low level of output but higher profit. The result of the study Most of the dwellers in Gerji site are large families with has realized that current Addis Ababa condominiums were children that get their very need proximity to the almost lower in quality but higher in demand and transaction that amenities were fulfilled such as; (schools (3-5min), clinic even would be able to change the behavior of the rich and (3-5 min), recreation (3-15min) adult walk. Moreover, it is the poor. restricted from high transport modes so better to live there and have better economic activity in a neighborhood. On Among the open-ended questionnaire answers, more than the Summit site, most of the living units have occupied by 50% of the professionals agreed with consumer taste as a single dwellers. Dwellers take the time of average 1 hour- factor for affecting the demand, about 75% of respondent 2:30 on their way to work, of 30 min- 2 hours for other officials agreed with consumer expectation and more than social services. This is as far as what they need in 72% of them strongly agreed with that of material costs. inefficient infrastructure and the Lideta site from the Eccentrically, about 90% of these officials agreed on the dwellers above 50% are doctors from the Black Lion, disequilibrium of supply and demand to the condominium largest Hospitals in the city and the country and merchants units. Of the sample respondents, about 78% agreed with from the Merkato, the largest market from the city and the demand for rental units and inflation factors on the country. As a CBD Lideta is accessible for any need, resale price by shifting demand towards these therefore, the units were more valuable, noisy and higher condominiums. crime levels compared to the others.

Condominium Marketability and Active transaction, when compared to other real estates, looks more active. According to the questioner survey, more than 87% of respondents agreed on higher housing demand and small in a number of available units and unaffordability of the present housing price, mainly on the . However, these professional respondents agreed on the buyers and sellers get imperfect information about the other private or cooperative real estate types from the quality or construction level, ownership right and market facts.

Locational Factor Map 2. Location of Lideta condominium near to a CBD and main centers Location is the main decisive factor that the distance from home to work, schools, shops, hospitals and important According to these housing unit conditions as a preference factors that make up a good location in connectivity/ (LIKE MOST) to condominium units, the largest population accessibility, utilities, existing and upcoming approximately 47% has preferred the unit based on developments and social infrastructure. Thirdly, Location factor (i.e. proximity and accessibility). The infrastructure quality of life namely transportation, second largest liked from the unit was about 18.3% of neighbors, recreational areas, water supply, sewerage, households, were selected by the availability of utilities. power, phone-connectivity, waste disposal and amenities: The third population share 34.7% were completely from the social infrastructure, playgrounds, adequate dissatisfied with their unit conditions and the rest chose the parking space and security are an important part of home unit by its amount of space and number of rooms. On the life. These are the Determinants of Transaction Value contrary, the second variable, (LIKE LEAST) showed the Factors on Condominium Properties (Lonappan, J., 2013) largest share is 61.7% of the respondents’ informed poor studied that there is a great deal of diversity among drainage as the least feature about their unit. Almost

Factors Determining the Continuous Price Appreciation of Condominium Units in Addis Ababa World J. Civ. Engin. Constr, Techn. 70

38.3% of households disliked the scarce to enough space, In this Study, one of the most features choose to live was poor quality, lack of utilities, poor drainage, and Location neighborhood, and the result showed that; from the (far from centers). positive (BEST FEATURES) above 31% of the respondents preferred their quarter with its access to As stated by the findings in (J. Kahr and M. C. Thomsett, utilities. The 19.4% population prefer proximity to social 2005) analysis, traffic patterns, location of regional and services and the rest 23% were by the familiarity of the local jobs, transportation issues (public as well as auto- area and closeness to their work. In the contrary, (WORST based transportation patterns), and the proximity from the FEATURES) 29% of the population had seen their site to schools, shopping, and other local amenities are neighborhood as poor access to jobs and social services, main factors affecting housing market. The shape of the about 34.4% for its poor infrastructure and (17.2%) for poor market is not also likely to be round, but is more likely to drainage and most of all about 10.8% of the respondents’ follow development and roadway factors, location of jobs, distress with the crime level of their neighborhood. and the competitive factors existence of competing or planned apartments within that realistic market area.

Table 3: Characteristics of condominium dwelling units and conditions s/no Variables Variable categories No of respondents Percentage (%) Amount of space number of rooms 8 8.6 Quality of unit 4 4.3 Location 44 47.3 Utilities 17 18.3 LIKE MOST 1. Other 2 2.2 Completely dissatisfied 15 16.1 All 3 3.2 Total 93 100.0 Not enough space or rooms 17 18.3 Poor quality 9 9.7 Utilities 5 5.4 2. Poor drainage 28 30.1 LIKE LEAST Location 11 11.8 All 19 20.4 Completely satisfied 4 4.3 Total 93 100.0 3. Good 28 30.1 Fair 63 67.7 UNIT COND Bad 2 2.2 Total 93 100.0 4. BESTFEATURE Proximity to work 10 10.8 Access to utilities 29 31.2 Familiarity to area 12 12.9 Proximity to social services 18 19.4 Nothing 11 11.8 Everything 13 14.0 Total 93 100.0 5. WORSTFEATURE Poor drainage 16 17.2 Poor infrastructure 16 17.2 Poor neighborhood 3 3.2 Poor access to jobs, social services 27 29.0 High crime level 10 10.8 Completely satisfactory 11 11.8 All 10 10.8 Total 93 100.0

Challenges on the condominium Transaction price as the demand shift to the existed units. Corresponding to management after transfer the economy of the society, there were no better alternatives to have a house that is the reason with the Based on the officials’ response from the open-ended higher demand. Furthermore, the government constructed questionnaire, perceptions flowed that; on the inner city condominiums delay with different complications there was no means of housing to the low and middle- exacerbate the selected problem mainly for low and income individuals and even the delay to supply perceived middle-income citizens.

Factors Determining the Continuous Price Appreciation of Condominium Units in Addis Ababa Melesse H. 71

The lower-income level of the society plus higher land a disposable way. It was too much to afford, high price and value and scarcity influences the price of rent in the city. low quality regarding these material usages and even they Land tenure issues, a supply of land and its incremental have a design problem. Moreover, there were a number of price brought a narrow opportunity to the individuals to factors that determine condominium market one was the build their homes with a medium potential. Therefore, cost of purchase; it has to be some legal frameworks about currently, the prime choice to occupy with middle income the condominium sale price, but the ups and downs as a real estate remains these condominium units. The coordinated by illegal brokers. It yields a cause to the society with a misunderstanding and a less adaptation on of the poor for the reason that of the value of an integrated residential building moreover the selected high price on the CBD (central business district). units associations were self – administrative, this became a bottleneck to the management and administration. Analysis in an Econometric Setting People with many homes tend to occupy the units and marriage conditions (they made fraud using marriage and For convenience in analyzing the ratio variables, the separation), lottery view cases moreover the system of econometric model has set up in an analysis pattern based thrift for the units and corruption were the main deceptive on secondary data of the 37 sold residential units on the activities on the dynamic market exercise. selected sample condominium sites in Addis Ababa from the year 2015 - 2019 G.C. Therefore, the current housing transaction in Addis Ababa was very unhealthy and unsound. The role of The determinants of condominium housing prices were brokers was very high mainly on price variation and analyzed by identifying factors influencing the unit's dynamics, which means they made a big role in making transaction, its demand and price appreciation by using fluctuations as their wish in order to increase their multiple linear regression models. This was done based on commission acting for sale by harrying the purchaser and the relationship established between housing price the seller in between. Based on the gradational difference (dependent variable) and the independent variables. In of the condominium transaction price, boosted the higher line with the continuous character of the data consists; the rate day-to-day and has created market instability. Time, money, inflation and interest rate and in order to define the dependent and independent variables Challenges used to address condominium housing appropriately was encountered regression equations problem-related factors where the dependent variable appears in a logarithmic form (log-level). It is the percentage increase in price the According to the transaction offices on the sub-cities, the same increase in one percent explaining the variation as a site planning problems and sanitary problems were the function of house price with certain explanatory variables main causes of the disagreement between dwellers and data set such as the amount of bed, internal floor area (per their neighbors. Another management problem was the Square meter), story type and location. fraud of selling the units in a mortgage way before the five years (within the prohibited period) illegally. In order to gain In addition, after running the OLS regression the additional profit dwellers, use illegal construction on the association between explanatory variables checked by units. In construction, the quality construction material is using variance inflation factor (VIF), which shows how the critical because the building must get proper strength, in variance of the estimate is inflated because of the bole site materials were obviously not as a requirement. presence of Multi-collinearity. But there is no serious There was no quality work of construction according to its problem of Multi-collinearity since all values of VIF were durability and quality; that was very poor. Furthermore, below ten (on average 2.22) and assumed minimum there were wastages in both material and funding that because the value of VIF less than 10 does not bring a expose to the scarcity of finance. Government finance serious problem of Multi-collinearity. does not allocate in a proper way for the targeted area seen through the quality, the scheduled time, how fast it Table 4: Variance inflation factor of independent variables goes and evadable information about it. Generally, about that tests the Multicollinearity 50% of each officer respondents from different offices said VIF that land value and dynamics of raw materials price for Variable VIF 1/VIF construction were the reason for the fluctuation. No of bedrooms 3.52 0.284032 Internal floor area 3.28 0.304643 Quality, supply, and finance were the main encumber in Year 2.29 0.437501 one way or another, more of the poor especially the pro- Interest rate 2.01 0.496657 poor was not advantageous and there was a gap with the Inflation 1.87 0.534151 granted occupation for the deserved community than that Storey Type 1.31 0.764431 of individuals with one or more . Very few affluent Location 1.27 0.785222 were the only homeowners and monopolized the market in Mean VIF 2.22

Factors Determining the Continuous Price Appreciation of Condominium Units in Addis Ababa World J. Civ. Engin. Constr, Techn. 72

Heteroscedasticity test was performed using Breusch- Number of obs = 37 pagan/Cook-Weisberg, and it suggested there is F(7, 29) = 30.83 homoscedasticity, which means there is no problem of Prob > F = 0.0000 heteroscedasticity. The null that the errors have constant R-squared = 0.8816 variance is accepted. In addition, error terms are normality Adj R-squared = 0.8530 distributed as the normal probability plot for residuals Root MSE = .17002 approaches to the normality line.

The 퐹-statistic ratio was highly significant at less than a 1% Interpreting the Regression Coefficient Estimate probability level. This showed that the main (alternate) Results hypothesis formulated, that is, “there is significant variability of housing price under different variables” has Equation 2: ln (House Price) = β0 + β1 (year)+ β2 2 accepted. The coefficient of multiple determination (R ) (inflation)+ β3 (storey type) + β4 (location)+ β5 (no of was 0.8816 which implies that 88.16% of the variations in bed) + β6 (interest rate) + β7 (internal floor area (sqm)+ housing prices were explained by the independent Ei variables includes in the model. The F-ratio was significant at a 1% probability indicating the goodness of the model. The dependent variable, house price is a function of The significant factors influencing housing prices were intercept (constant) plus the chosen variables. Based on Year, inflation, location, interest rate and internal floor area the outputs, the coefficients standing on β0 value of 13, - 2 per m . 0.15 of β1 standing for year, β2 value of 0.016 for inflation, β3 value to -0.12 for story type, β4 of -0.05 for location, β5 Table 5: The probability for F-test, the R2 and adjusted R2 0.018 value for number of bed, 0.09 for interest rate and Source SS df MS 0.017 for internal floor area. Model 6.23909617 7 .891299453 Residual .838297261 29 .028906802 Total 7.07739343 36 .196594262

Equation 3: ln (House Price) = 13 - 0.15 (year) + 0.041 (inflation) – 0.12 (storey type) - 0.05 (location) (0.2) (0.046) (0.016) (0.06) (0.012)

+ 0.018 (no of bed) +0.009 (interest rate) + 0.017 (internal floor area (sqm) (0.1) (0.0038) (0.002)

Table 6: The P-value and the Coefficients Affecting the Log Price Price Coef. Std. Err. t P>|t| [95% Conf. Interval] Year -.1492735 .046349 -3.22 0.003 -.2440678 -.0544792 Inflation .0418829 .0161126 2.60 0.015 .0089289 .0748369 StoreyType -.1249561 .065114 -1.92 0.065 -.2581292 .0082171 Location -.0506518 .0124516 -4.07 0.000 -.0761182 -.0251855 Noofbedrooms .0180066 .1049311 0.17 0.865 -.1966016 .2326148 Interestrate .0096362 .0038005 2.54 0.017 .0018633 .0174092 Internalfloorareamsq .017006 .0024972 6.81 0.000 .0118986 .0221133 _cons 13.00366 .2184784 59.52 0.000 12.55682 13.4505

Interpreting the Beta (β) in Log-Level Regression significant. A number of bed of the livable area is no longer statistically significant. Because the number of beds is If time is lagged by 1 year from the base year 2019, house accounting for the internal floor area and vice versa, price eased by 15% or over time it is increasing at a higher whereas the internal floor area increase in 1m2 rises the level and statistically significant. From the model result, house price by 1.7% and highly statistically significant. The inflation is statistically significant at the 5% probability interest rate based on their types has affected the selling level. The estimated coefficient of inflation implies that as price of the condominium unit positively and statistically inflation increased by 1% the house price increase by significant. 4.1%. On the other hand, floor level (story type) has a negative effect on housing price and it is statistically As a result, almost six variables are statistically significant significant at less than a 10% probability level. The longer at different probability levels. Therefore considering these the housing located from the CBD, 1km longer has 5 birrs variables are one of the most important things but also to (0.15$) increase the transport cost reduce the house price, look at other determinants that are affecting the current which is negatively affecting and highly statistically condominium residential unit price from the empirical analysis view cooperatively.

Factors Determining the Continuous Price Appreciation of Condominium Units in Addis Ababa Melesse H. 73

CONCLUSION REFERENCES

According to the response from the survey, the transaction AAHAA (2018).” allaboutEthio.com,” [Online] Available at: price from the cost quality and location perspective found https://allaboutethio.com/12th-round-20-80-three- very contrary where it has fluctuated and higher in price. bedroom-condominium-winners-list [Accessed 02 Results from the survey concluded that the main factors 2019] that influence the rise of house price i) higher rate housing Abraham, T. (2007). “Problems and prospects of housing supply, ii) corruption, iii) mismanagement cost, iv) development in Ethiopia", Property Management. wastage of materials, v) delay of construction, labor and Emerald Group Publishing Limited, Volume 25, pp. 27- bank interest costs vi) government finance and vii) inflation 53. were the reason for the transaction price instability. viii) Aluko, O., (2011). The effects of location and Brokers’ involvement of getting benefit on the neighborhood attributes on housing values in condominium properties, ix) government flexible metropolitan Lagos. Ethiopian journal of Environmental management and lack of control and x) locational studies and management, Volume 4. difference are the least. Animansa D. and Danimi G. (2014). Living in high-rise: An analysis of demand for condominium properties in Collected data from respondents were adopted into a colombo. African journal of Estate and Property tabulated format based on the survey category of variables Management , pp. 56-61. and per each respondent for both theoretical and Arvanities, Y. (2013). African Housing Dyamics: Lessons econometric description. Results from Multiple regression from the Kenyan Market. Africa Economic Brief. Analysis showed that almost all the listed variables that are Bereket, R. and Nigatu, R. (2015). “Housing and Poverty expecting to affect the Housing unit price found of in southern Ethiopia: Examining Affordability of statistically significant, but it suggests to look also on Condominium Houses in Hawassa city”, Economics, further determinants. The role of brokers on the price is and sociology. pp. 155-169, also very high on the price variation and dynamics, which D.N. Dwivedi (2010). “Monopoly pricing and substitute in means they have a big role in making the fluctuation. managerial Economics,” 8th edition. s.l.:s.n. Moreover the lack of knowledge, imprudence, and mainly D. N., Gujarati (2004). “Basic Econometrics,” 4th Edition, forced to sell including the mediator agents and even the Ed. New York: McGraw-Hill supplier (Governments’) Grand Projects shifted the Jayalath, J. (2016). Determinants of Market Value for demand. This would have made the demand monopoly Condominium Properties: Case Study in Dehiwala, towards condominiums. Colombo. Conference of Business Management, pp. 892-907. In comparison between the selected condominium sites Kahr, J. and M. C. Thomsett (2005). Real Estate Market and their adjacent Apartments, there was no such Valuation and Analysis. Canada difference but higher transaction, demand and incremental Frank, K. (2017). “African property market investment”. value towards condominium that is less liquid, and stability Africa Report along with residential. Private apartments now Lonappan, J. (2013). An evaluation of factors influencing in the city are higher in quality than the condominiums but cutomer's home buying decison. Parplex - Indian from the cost of their construction and the perspective of Journal of Research, Volume 2, pp. 158-160. people, they have no such transaction practice like the Mengistu, T. (2018), “allaboutEthio.com,” [Online] condominiums. The legal framework is another factor that Available at https://allaboutethio.com/ [Accessed 10 has prevented the private market from growing; many 2018] problems like delays and awareness were not solved MoWUD (2006). “Integrated Housing Development because of the lack of approved and clear proclamation on Program Volume II, GTZ low-cost Housing Project,” . Addis Ababa: Ministry of Works and Urban

Development(Government). ACKNOWLEDGMENTS Muli (2012). “Effects of Economic Factors on the performance of Real Estate in Kenya” First, I would like to thank God almighty for giving me the Samson B. (2015). “ezega.com”. [Online]. Available at: strength, ability and opportunity to undertake this study https://www.ezega.com/News/ and complete it satisfactorily. My genuine Sisay Z. (2014). “AAu.Edu.et”. [Online]. [Accessed 2018] acknowledgment goes to my advisor, Dr. Achamyeleh UN-HABITAT (2003). “Rental Housing- An Essential Gashu for his positive attitude to help and encourage me Option for the Urban Poor in Developing Countries,” to be industrious on the process of the Research , Kenya: UN-HABITAT. preparation. In my journey towards this research, I found a UN-HABITAT (2010). “The Ethiopia case of Condominium teacher and a pillar of heartfelt support at the path, Ato Housing: The Integrated Housing Development Hailemariam Behailu. Without his guidance, this paper Program. United Nations Human Settlement Program,” would not have been possible. I would also like to express Nairobi, Kenya: UN-HABITAT. my Gratitude to Ato Gebreegziabher Fentahun.

Factors Determining the Continuous Price Appreciation of Condominium Units in Addis Ababa World J. Civ. Engin. Constr, Techn. 74

Yared T. (2018). “Addis Fortune.com” [Online] Addis Ababa: Micro- and Macro economic Available at: https://addisfortune.net/columns/smaller Implications”, American Journal of Economic, Finance players on the age of condo shops escalate[Accessed and Management, pp. 1-9. 03 2019]. Zerayehu S. and Kagnew W. (2015). “Performance, Challenges and Prospects of Real Estate Financing in

APPENDIX Table 7: Sale data on condominium units from lideta, Gerji and Summit Table Appendix 1: condominiums…………………………………………… Respondent Tenure type Internal No of Common Location/ Workplace Public Crime Economic distance code (owner/ or floor bed area share edge, distance place / Frequency/ activity from lessee area rooms (in msq) & middle, playground annum status in noise (msq) price Eth. corner, / resting neighbor- Birr front to place hood road, back from the road 1 condominium 44.6 1bed 4th floor Summit 2 hours 1hour 2 no Better 920,000 2016 2 condominium 72 2bed 4th floor Summit 1-2 hours 2-3 hours 2-3 Not much A few 1.3mill 2018 3 condominium 44.6 1bed 2nd floor Summit 1 hour 30 min-1 no Not much Better 1mill 2017 hour 4 5-10 min 5 min 5 Very high Noisy 5 condominium 52 1bed 4th floor Lideta 30 min 1 hour 2-3 Good Far from 1.3mill 2017 noise 6 condominium 72 2bed 3rd floor Summit 2 hours 30 min-1` no A few 1.4mill 2018 hour 7 condominium 64 2bed 2nd floor Street 1 hour 30 min- 2 no A few 1.4mill side hours summit 2018 8 Condominium 47 1bed 1.1mill summit 30 min 3-10 min no Very good Far from noise 9 condominium 116 2bed 1st floor Gerji GTZ 2:30 30-1 hour 1-2 Low 2.5 mill 10 condominium 76 2bed 1.3mill summit 5min 3-10 min 5-6 Very good Noisy 11 condominium 62 2bed 1.3mill lideta 10 min 10-20 min 5 Very good Noisy 12 condominium 64 2bed 4th floor Lideta 30min 10 min 3 Very good Noisy 1.3 13 condominium 66 2bed 4th floor Lideta 45 min 10 min No Very good Far from 1.25mill noise 14 condominium 47 studio 4th Gerji 30 min 3-5 min 3 Very good Noisy 650,000 15 condominium 90 3bed 2nd floor Lideta 30min 10-20 min 2 Very good Noisy 2,800,000 Apr 19/2018 16 condominium 26 studio 3rd floor Lideta 1:30 1:30 No Low Far from 550,000 mar 16/ noise 2017 finishing 17 condominium 31 studio 1st floor Summit 1:30 30-45 min 1-2 Low Far from 500,000 mar 27/ noise 2017 18 Condominium 72 2bed 1.3 mill Summit 30 min 5-15 min No Very good Noisy mar 3/2017 19 condominium 29 1bed 530,000 Lideta >2hours 30 min-1 No Low Far from feb2017 hour noise

Factors Determining the Continuous Price Appreciation of Condominium Units in Addis Ababa

Melesse H. 75

20 condominium 47 1bed 4th floor Summit 30min 15- 20 min No Low Far from 820,000 finishing noise Oct 04/2017 21 condominium 47 1bed 2nd floor Summit 1 hour 20 min No Good Far from 800,000 finishing noise Sep 15/2017 22 condominium 47 1bed 4th floor Summit 1hour 30-1hour No Low Far from 780,000 finishing noise Sep4/2017 23 condominium 46.5 1bed 3rd floor Sep 4/ 2 hour 45 min- No Low Far from 740,000 2015 1:30 noise Summit finishing 24 condominium 47 1bed 2nd floor Aug 3/2017 2-2:30 30 min- 2-3 Low Far from 750,000 Summit hours 1:30 noise finishing 25 condominium 47 1bed Ground Summit 30 min 15 min- 1 A few Far from floor finishing 1hour noise 850,000 Jul 21/2017 26 condominium 47 1bed 2nd floor Summit 30 min 1hour- 1 Low Far from 800,000 finishing 2hours noise Jul22/2017 27 condominium 47 1bed 3rd floor Summit 1:30 hour 30 min- No Low Far from 720,000 finishing 1hour noise Jul 21/2015 28 condominium 72 2bed 3rd floor Summit 1 hour 10 min No A few Far from 1.3 mill finishing noise Sep 20/2017 29 condominium 72 2bed 3rd floor Summit 2hours 30 min- 1-2 A few Far from 900,000 finishing 1:30 noise Sep 15/2017 30 condominium 72 2bed 3rd floor Summit 3 min 3-7 min No Very good Far from 1.45 mill finishing noise Jan/2018 31 condominium 48 studio 1.1 mill Gerji 20 min 10 min 1 Very good Far from finishing noise Aug/2017 32 condominium 74 2bed 1.6mill Aug/2017 5 min 5-10 min 1 Very good Far from Gerji noise finishing 33 Condominium 62.4 1bed 1.8mill Aug/2017 20-30 min 5 min No Very good Noisy Gerji finishing 34 Condominium 84 3bed 2.6mill Lideta 2-2:30 2 hours No Low Far from 1st floor Mar/2018 hours noise 35 Condominium 84 3bed 1.6mill Summit 5 min 5 min-10 5-6 Very good A few 1st floor aug/2018 min 36 condominium 52 1bed 1.4mill Gerji 1:30 15-30 min No Very good Far from 2nd floor sep/2016 noise 37 condominium 72 2bed 1.8mill Gerji 15 min 5- 10 min No Very good Far from 2nd floor sep/2018 noise

Factors Determining the Continuous Price Appreciation of Condominium Units in Addis Ababa World J. Civ. Engin. Constr, Techn. 76

Table 8: Apartment Sale data from Lideta, Gerji and Summit Tenure type Location/ edge, middle, Price in R. (owner/ or Internal floor corner, front to road, Ethiopian code lessee area (msq) No of bed rooms Year/ back from the road Birr 1. 1. Apartment 75 m2 2 bed+ 2 bath 2017 Modern kitchen summit 1,900,000 2. 2 Apartment 76 m2 2017 summit 1,600,000 3. 3 Apartment 74 m2 2bed+1 bath 2017 Summit, 3rd floor 1,600,000 4. 4 Apartment 74 m2 3bed+2 bath 2017 Summit, 1st floor 1,600,000 5. 5 Apartment 105 m2 3bed+2kitchen+2bath 2017 summit 2,000,000 6. 6 Apartment 47 m2 1bed+1bath 2019 Summit, ground 1,400,000 7. 7 Apartment 53 m2 2 bed+1bath 2019 Summit, 1st floor 1,700,000 8. 8 Apartment 63 m2 2bed+2bath 2019 Summit, 4th floor 2,300,000 9. 9 Apartment 90 m2 3bed+2bath 2019 Summit, 4th floor 2,500,000 10. 10 Apartment 112m2 3bed+2bath 2019 Gerji 2,900,000 11. 11 Apartment 90 m2 2bed 2019 Gerji 1,900,000 12. 12 Apartment 100 m2 3bed+2bath 2018 Gerji 2,200,000 13. 13 Apartment 18 bed+19bath 2019 Gerji 22,000,000 14. 14 Apartment 3bed+2bath 2017 summit 1,600,000 15. 15 Apartment 105 m2 3bed+2bath 2018 Summit, well furnished 2,000,000 16. 16 Apartment 3bed+2bath 2018 Summit 1,250,000

Questionnaire for the dwellers

1. Your level of education: (A) Secondary school (B) Diploma and certificate (D) First degree and above 2. Your income from:______3. How do you get the house? a. Relocation b. buy c. rent d. other explain 1. If buy 3.1.1. How much did you purchase?______3.1.2. When did you purchase? The year? Month?______2. If you rented 3.2.1. How much do you pay monthly?______3.2.2. How many rooms the houses contain?______3.2.3. Have you ever had same rent experience before? Where and how much? With how many rooms? ______4. Do you have children or other family with you? a. Yes b. No 5. If you have children (other family), how many? ______

Section II. Tenure and shelter history 6. Now I would like to get some information on your housing arrangements

5.1. What do you like most about this unit /LIKE MOST/ Amount of space number of rooms Quality of unit Location Utilities –availability of water, electricity etc Other Nothing, completely dissatisfied

Factors Determining the Continuous Price Appreciation of Condominium Units in Addis Ababa Melesse H. 77 5.2 What do you like least about this unit /LIKE LEAST/ Not enough space or rooms for household Poor quality of unit Utilities- water, electricity etc not available Poor drainage Location Other …………………….. Nothing, everything is satisfactory 5.3. What do you think about the condition of your unit /UNIT COND/ In good condition In fair condition In poor condition

Section III. Neighborhood, location and access characteristics Now I would like to ask your opinion about the neighborhood in general ______

6. Which amenities do the household use, how long does it take to get there, how much does it cost? /AMENITIES/ time Cost/birr/ Mode of transportation /min/ week year A Work/household head/ B shopping C school D Hospital or clinic E Other …………………….

Mode of transportation codes Walk taxi City bus other …………

7. What feature do you like most about this neighborhood? /BESTFEATURE/ Proximity to work Access to utilities Familiarity to area Proximity to social services

8. What feature do you like least about this neighborhood? /WORSTFEATURE/ Poor drainage Poor infrastructure Poor neighborhood Poor access to jobs, social services High crime level Other ……………….

2 Closed ended questionnaire for the selected sample respondents of:

For the following questions, please put (X) mark in the box corresponding to your preferred response using the scale below:

SA: Strongly Agree A: Agree UD: Undecided D: Disagree SD: Strongly Disagree

1. What do you think the factors to the current demand for condominium housing, and the factors for that demand? No Critical factors to the current demand for condominium Scale SA A UD D SD 1. Demographic issues related with the migration for job and education 2. Higher shortage of housing and the need for shelter 3. Newly introduced housing alternative for low and middle income groups 4. Income of the customer( affordability) 5. The amount of the price of the particular housing

Factors Determining the Continuous Price Appreciation of Condominium Units in Addis Ababa World J. Civ. Engin. Constr, Techn. 78 2. How do you see the current condominium transaction price and its marketability? No factors for current condominium higher transaction frequency and active marketability Scale SA A UD D SD 1. Third person; the brokers and other agents and their advertisements liaises in between transactions 2. Higher housing demand and small in number of existed housing 3. Un affordability of the existing housing price mainly on the apartments or no vacancy

3. How do you estimate the condominium re sale price related with the transfer value? No The current condominium re sale price relation to the transfer value Scale SA A UD D SD 1. The transfer value rises the price for the transaction based on the higher inflation rate in affecting the condominium construction 2. The demand pull inflation that is affecting those who receive the fixed nominal incomes and help those who receive flexible nominal incomes 3. The rate of interest and higher dept on the transferring process 4. Because condominiums are an income generation areas or a non-investment transactions because of transactions on the transfer of existing assets unlike other private houses and these mere transfer doesn’t create new capital 5. Based on the mere transfer and the higher demand of the space market to transact affects the condominium price 6. Flexible transfer and valuation system

4. What do you think the factors to the current demand for condominium housing, and the factors for that demand? No the factors of preference and highly liquid of condominium housing than alternative Scale apartment SA A UD D SD 1. Listed prices; from all over the real estate the condominium value is lower in price 2. Extra infrastructures that are fulfilled around the condominium than other apartments (like public transport, school for children and other commercial uses for the dwellers) 3. Because of lack of comparable or substitution effect, there is no better alternative than the condominium units 4. Imperfect information, about other real estates and more information for condominiums among the home seekers and buyers 5. Transaction volume; if the current transaction volume among the condominium influences the demand towards 6. Brokerage services, giving information that could shift the demand towards the condominium and make it more liquid 7. Interest rates and economic conditions

5. Who are the accelerators on the supply and demand space market on these housing types? No Factors in accelerating the supply and demand space market on condominium Scale transaction and price SA A UD D SD 1. Demographic issues 2. Brokers 3. Inflation prediction 4. Lack of control 5. Flexible management

6. What do you think the solution in avoiding the speculation and uncontrolled incremental value of condominium unit? ______Accepted 10 June 2020

Citation: Melesse H (2020). Factors Determining the Continuous Price Appreciation of Condominium Units in Addis Ababa. World Journal of Civil Engineering and Construction Technology, 4(1): 064-078.

Copyright: © 2020 Melesse H. This is an open-access article distributed under the terms of the Creative Commons Attribution License, which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are cited.

Factors Determining the Continuous Price Appreciation of Condominium Units in Addis Ababa