Ripple Effect in Regional Housing Markets

This paper examines the ripple effect in the Nigerian regional housing market by analysing the long run connectedness and lead-lag relationship among housing returns of three cities in the country.Data on the investment returns of housing assets of bungalow, block of flat and detached house used for the study in the 1999-2022 period were collected from real estate firms in Lagos, Abuja, and Port Harcourt, Nigeria.Stationarity was tested using Augmented Dickey Fuller and Philip Perron unit root tests while Johansen and Juselius and Granger causality tests were employed to examine the long run convergence and leadlag relationship between the housing assets.The results of the cointegration test showed long run convergence among the returns of the various residential property assets in the three regions, indicating the possibility of ripple effect.However, the Granger causality test revealed differences in the lead-lag relationship among the regional housing returns based on housing typology.The study concludes that the existence of ripple effect in the housing markets across the three locations is limited by variations in housing typologies which reduces the extent of price diffusion in the housing markets.The findings have profound implications for investors participating in the Nigerian housing market.