Location and Neighbourhood Effects on Urban Housing Values: Case Study of Metropolitan Lagos

Empirical studies of housing values are inconclusiv on the impact of neighbourhood variables on the household's residential ·choice because they assume that the effect of structural characteristics of housing on property values is fixed, L e invariqnt across neighbourhoods. The contribution of . structural housing attributes in housing price determination fails·to take into account the geographical realities operating at neighbourhood levels. In add:ition, the issue of spatial scale for delineation of urban housing submarkets and for the consideration of neighbourhood variables have not been adequately treated in previous studies. Therefore, this study examines the different housing prices produced by housing attributes at different locations and their influence on the spatial variations in the demand for ne-ighbourhood attributes. The aim of th.is re·search is to determine and analyse relative roles of location, spatial scale and the physical characteristics of houses in the determination of housing values. In order to achieve this, the study: (i) shows how house prices vary by area and the role of changing spatial scale in the understanding of housing values; (ii) evaluates the effects of physical properties and the role of neighbourhood attributes in the determination of house prices in different areas of the city; (iii) shows how changing spatial scale of housing attributes leads to identification of housing submarkets in metropolitan Lagos and; (iv) determines the,extent to which these findings help in the understanding ·of the structure of housing market in Nigerian cities. The four hypotheses tested in this study were designed to know both the degree of absolute price effects of houses on each other and the differentiated contributions of various housing attributes in different neighbourhoods and submarkets. They are: (1) There are variations in the.prices of houses by location and by neighbourhoods; (2) Households having high socio-economic characteristics occupy highly valued housing units; (3) The measurement of housing values through varying spatial scales of investigation within the cities yields different results for the analysis of housing submarkets; (4) The variation in house prices for different submarkets may be explained by differences in structural I physical; characteristics of houses, neighbourhood attributes and, location in space, The conceptual framework focuses on housing at both micro and macro levels. The micro is the househc,ld, while the macro is spatial and relates to areas within the city. There are therefore two sets of theories: urban micro-economic and macro-economic theories that provide conceptual issues for the study. The first include the trade-off models and their more recent reformulations, the hedonic model and the expansion method; while the second involves the urban spatial structure and the ecological approach to urban land values. The study is based on data collected from ten Local Government Areas consisting of 53 residential zones in metropolitan Lagos. Out of the total number of 135,820 properties, a size of about 1% '(1,410) was randomly selected. The choice of the study area, Metropolitan Lagos, is based on many factors. First, the housing markets are very well developed in Lagos. Consequently, it is possible to identify and analyse variations. Secondly, comprehensive data is available on prope~ty values in the state. The data are expected to be useful in the explanation of the variations of housing attributes over space. The results of the examination of spatial variations of neighbourhood and locational attributes on house prices showed that there are significant variations in all the explanatory variables. For instance, the annual income of the household head is noted to be the most significant predictor of the house values and there is a strong association between income and house values. Other important variables are type of people living in the area, area of land occupied, number of rooms occupied, number of;Persons in the households, type of buiding occupied, location of workplace and transportation cost. The analysis proved the important role of neighbourhoods in house rental charges. The spatial variations of neighbourhood and locational explanatory attributes confirm the first hypothesis that there are variations in the prices of houses by locations and neighbourhoods. The significant variations in almost all the variables in the different neighbourhoods were attributed to the various locational differences which exist in the housing structures. The study showed tha.t the use of small geographical areas helped to identify similar zones and neighbourhoods that have the same housing values and similar socio-economic characteristics. This is unlike some of the previous studies that combined wider areas together and so failed to identify spatial submarkets. In order to achieve this, the study utilized four different geographical scales to evaluate and identify the level 'at which studies of yariations of house values become meaningful. It showed that the highest level of disaggregative data occur where cities are divided into small, near homogeneous areas or zones. These variations in house values by zones become more distinct than house values for communities and local governments that bear the same name. The results validate the hypothesis that the spatial scale of areas of investigation within the cities affects the measurement of housing values.