Interest Rate as a Determinant of Housing Prices in Lagos State, Nigeria

Abstract

The study investigates the roles of interest rate in determining housing prices in Lagos Nigeria. Data on prices of houses in the study area were collected using structured questionnaire. Two hundred and forty seven copies of the questionnaire were administered on the registered Estate Surveyors and Valuers, out of which 230 were duly filled and returned for analysis. Mortgage lending rates between 1989 and 2008) were obtained from the Statistical Bulletin of the Central Bank of Nigeria (CBN). Trend analysis and correlation analysis were used for data analysis. The results show that there is a relationship between the prevailing interest rate and housing prices in the study area while the correlation analysis also shows that the relationship between interest rate and housing prices is significant at 5% for block of flats and detached house and 10% for duplex. The study further reveals that fluctuation in mortgage lending rates leads to corresponded change in the prices of the residential property and that when there is high rate of interest in the lending policy of the economy, there is always a corresponding increase in the prices of the property and vice-versa. Consequently, it is recommended among others that financial institutions should reduce their lending rates to affordable rate.