EFFECT OF MACROECONOMIC FACTORS ON RESIDENTIAL PROPERTY RETURNS IN ABUJA, NIGERIA

Abstract

Performance of property market is a measure of total returns, and the totality of returns within the country property market is influenced by the state of the economy. 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 study utilized both primary (returns) and secondary data (macro-economic variables), and the time-series data on annual macroeconomic indices and total returns index spanning between 2001-2015 were employed for the study. The result of Augmented Dicker Fuller (ADF) test showed that all the variables were stationary after first and second differencing order. The result of 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 3B/R and 4B/R property returns respectively across the seven out of twelve residential markets were significantly influenced by macroeconomic indicators. The study concludes that positive economic policies are meant to improve the property market, vice versa. The study therefore recommends that policy-maker should painstakingly study the future implication of any macroeconomic policy as such could adversely affect the property market, and this could also conversely affect the contribution of real estate sector to the national economy development, vise-versa.