Influence of macroeconomic factors on residential property returns in Abuja,Nigeria

Abstract

An attempt was made in this study to bridge the existing gap in the knowledge of the influence exerted by macro-economic factors on residential property returns in Abuja. The backward and forward relationship between property market and the economy has influenced a rise and fall in future of property returns in Abuja market. The methodology employed primary data for returns and secondary data for macro-economic variables, time-series data for annual macroeconomic indices and total returns index spanning between 2001 and 2015. The populations of study consist of transactions of sales (429) and lettings (1213) during the stated period; the respective sample sizes of 286 and 436were quantitatively determined using Frankfort-Nachmias model. The result of Augmented Dicker Fuller (ADF) test showed that all the variables were stationary after first and second differencing order. Tue result of eagle granger cointegration test further suggests the existence of long run relationship between macroeconomic factors and residential property returns. The result of further cointegration regression suggests that between 18.2%-83.6% and 16.2%-79% variation in 3-Bedroom (3B/R) and 4-Bedroom (4B/R) property returns respectively across seven out of twelve residential markets were significantly influenced by macroeconomic indicators. Tue study concludes that positive economic policies aremeant to energize the property market, and vice versa. The study therefore recommends that policy-makers should painstakingly study the future implications of any macroeconomic policy as they could adversely affect property returns, and by extension, the contribution of real estate sector to national economic development

Keywords: Cointegration regression analysis, macro-economic factors, property returns