An Analysis of the Effect of Distance on Rental Values of Residential and Commercial Properties in Kumasi, Ghana

Abstract

The effect of distance on rental values (prices) has raised concerns on how rents increases vary from one area to another. The theory of bid rent proposed by Alonso shows an inverse relationship between distance and rent. Thus, the closer a property is to the Central Business District (CDB), the higher its value and vice versa. This study therefore sought to find out how this theory applies to rent charged on residential and commercial properties in Kumasi, the second largest city in Ghana. The study used the survey research approach and applied the cross-sectional design. In all, 100 respondents; fifty tenants and fifty landlords were selected using the simple random sampling technique. Analysis from the study validated the bid rent theory and indicated that distance from the CBD has an inverse relationship with the rent charged on residential and commercial properties in the Kumasi Metropolis. Thus, as distance increases from the Central business district of the Kumasi Metropolis, the prices of residential and commercial properties reduce and vice versa.