HEURISTICS IN PROPERTY INVESTMENT VALUATION IN NIGERIA

The study addressed the gap in research on heuristics in valuation which has hitherto been confined to only anchoring and adjustment heuristics at the neglect of the other three major types of heuristics, namely availability, representative and positivity heuristics. The aim of this work was accordingly to investigate the nature and conduct of all four types of heuristics amongst Nigerian valuers with a view to ascertaining possible effects on valuation accuracy. The specific objectives of this research were to: examine whether valuers are influenced by availability, positivity and representative heuristics in property valuation practice in the study areas; investigate the relative level of occurrence of the four heuristics in property valuation; identify and examine factors influencing the usage of the various types of heuristics in property valuation; investigate the effect of these heuristics on valuation accuracy/consistency. To accomplish these objectives, the study undertook a cross-sectional questionnaire survey of 159 of the 270 Estate Surveying and Valuation firms in Lagos Metropolis, while 29 and 30 questionnaire were distributed to the entire Estate Surveying and Valuation Firms in Abuja and Port-Harcourt respectively. For ease of coverage, Lagos Metropolis was stratified into six zones thereafter respondents were selected randomly. Statistical tools, ranging from descriptive to inferential, were employed. These included frequency distribution tables, weighted arithmetic means, relative importance indices, regression analysis, the Student T-Test and Analysis of Variance (ANOVA). The results revealed that apart from anchoring and adjustment, valuers also make recourse to availability, representative and positivity heuristics while carrying out valuation. The relative usage of these heuristics was in this order of usage: availability (26.77%), anchoring and adjustment 18.62%), representative (15.63%), and positivity heuristics (10.41%). The factors that were found to affect the usage of these heuristics by usage of regression Analysis) included amongst others low familiarity with the areas where valuation were carried out (p values = 0.251, 0.192, 0.059, 0.192); complexity of the investment valuation model adopted (p values = 0.077, 0.119, 0.87, 0.889); and the level of assumptions made by the valuer; (p values = 0.842, 0.525, 0.044, 0.792). It was also discovered by use of Student T Test of Significance that the usage of the heuristics results in valuation inaccuracy (in the following reducing order of magnitude): representative (p value =0.009); availability (p value =0.016); anchoring and adjustment (p value = 0.055) and positivity heuristics (p values = 0.179). The study therefore recommended institutional discouragement of the usage of heuristic techniques which could be achieved through appropriate re-education of practitioners and other methods. The study has found that all four major heuristics are evident and they have negative impact on valuation accuracy therefore urgent implementation of recommendations proffered would make estate surveyors and valuers’ better and more accurate in their major area of specialization.