Determinants of Urban Land Lease Market in an Emerging Economy: Empirical Evidence from Ethiopia

Abstract

Purpose: The ultimate objective of the study is to examine the determinants of the urban land lease market in an emerging economy with empirical evidence from Ethiopia. Design/Methodology/Approach: A nomothetic methodology with a standardized and quantitative method of data analysis was adopted for this study. The data was gathered from the Mekelle municipality between 2014-2019. The data was analyzed using the pooled ordinary least square technique. The model produced robust relationships and consistent results with previous studies. Findings: The study found both supply and demand-driven factors associated with plot markup price. The findings revealed that plot size, payment period, monthly income, plots accessible to basic services, plot location, land use type, and land lease auctioned period associated positively and significantly with the urban land lease markup price. Auctioneers paid a premium for plots having a larger size, extended payment period, access to basic services, and specified for residential housing. On the other hand, distance, and plot inaccessible to basic services associated negatively and significantly with the urban land lease markup price. Practical Implication: The rapid urbanization in Ethiopia has generated intensified supply and demand-driven challenges for public policy. Hence, the municipality should enhance infrastructure development across all plot locations and exercise strict control of land speculation to increase municipal revenue, and address supply and demand-driven challenges. Moreover, the municipal government should ensure equitable access to urban land by controlling land speculation. Originality/Value: Several studies that have assessed urban land expansion and administration, however, paid less attention to the urban land lease market. Furthermore, in an economic sense, it is crucial to examine the urban land value determinants from both demand and supply side at a time when less attention has been paid thereto in the literature.