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The value of formal titles to ownership in residential property transactions: Evidence from Kinondoni municipality Tanzania

Samwel Alananga

ERES from European Real Estate Society (ERES)

Abstract: Under property informality, perceptions on transaction failure risks at purchase can diversify the spectrum of possible prices depending on anticipated occupation strategies subsequent to purchase. Based on survey data on 1514 residential property owners from Kinondoni municipality, Dar es Salaam Tanzania, binomial logistic regression models were implemented to predict pre-purchase perceived transaction failure risks and mixed effect models were utilised to examine the effect of the predicted risks on (2010 constant) price of three-bedrooms finished and unfinished housing units and 400m2 plots. The results suggest that risk averse households pay on average around Tanzanian Shillings (Tshs) 349,000/= more to acquire formally titled residential properties than they would pay for similar but informal properties simply because of a lower perceived transaction failure risk for the former. Such lower perceived risk is however, unambiguously relevant only among "unfinished housing" purchasers. For "vacant plots" and "finished housing" units, a positive net risk-price premium is dependent on the anticipated occupation strategy subsequent to purchase. On average "frequent visitation" after purchase induces a higher risk-price premium over formal purchases for both "vacant plots" and "finished housing" units. A Legal title to a "vacant plots" has a small risk-price premium of around Tshs. 5,000/= over "effective occupation" for the same but a relatively higher risk-price discount for "frequently visited" plots among risk lovers yielding a positive net risk-price premium of around Tshs. 16,000/=. These marginal risk-price premiums for "vacant plots" suggest that informal and formally titled plots sale on average around the same price regardless of whether the purchaser is risk averse or otherwise. Formally titled "finished housing" is on average, purchased at a higher price but such premiums are limitedly associated with risk aversion suggesting that such premiums emanate from factors other than the use of formal titles in transactions.

Keywords: Developing Countries; Housing transactions; Ownership titles; Price premiums; Transaction risks (search for similar items in EconPapers)
JEL-codes: R3 (search for similar items in EconPapers)
Date: 2017-07-01
New Economics Papers: this item is included in nep-iue
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