Investigating the Hedonic Housing Price Model for Lagos Residential Market

Abstract

The conundrum on what exactly consumers are willing to pay for when demanding for housing remains a concern in the developing world. This study investigates the hedonic housing price for Lagos residential market with a view to determine the willingness to pay for housing quality traits. The hedonic pricing model is one way through which willingness to pay is being measured. The data employed was obtained from adult residents in the urban centers of the state (Lagos Metropolitan city). Specifically, Lagos State has 20 Local Government Areas (LGAs), out of which 16 constitute the Lagos Metropolitan City. Multistage sampling technique was used to select a sample of 677 housing consumers from the population. The Ridge Regression (RR) was used to estimate the multifactorial model that formed the hedonic housing price model. This method overcomes the problem of multicollinearity in the model and produce unbiased estimates. The findings show that house type has a higher impact on the willingness to pay for a house. Flooring condition of a house is more considered by the consumers than its roofing and walling. Besides, availability of clean water is the most important variable that consumers consider in the basic attribute as relates to life essentials. The next to it is the availability of fence in the apartment. In essence, security of life and property remains a concern to living in Lagos and Nigeria by extension. This underscores the need for Nigerian government to sincerely tackle insecurity in the nation. Essentially, government must strengthen its intelligent mechanisms so as to unravel and deal with internal and external sponsors of insecurity in the country. Closeness to bank and commercial centres stands to be the variable with the greatest impact on willingness to pay among the positive environmental externalities. Meanwhile, a unit increase in travel distance to hospital, market and water facility decrease willingness to pay by 6.1 percent, 3.4 percent and 0.6 percent, respectively. In all, house consumers in the city are willing to pay different prices for different housing quality traits.