Modelling the Long-Run Relationship Between Housing Finance Development and Real Estate Market Stability in Nigeria

Housing finance market underdevelopment is a structural feature of the Nigerian real estate market, and the long-run relationship between housing finance depth and real estate market stability has important implications for both financial sector policy and urban development strategy. This study models the long-run relationship between housing finance development and real estate market stability in Nigeria using annual data from 1995 to 2022. Housing finance development was measured by the mortgage credit-to-GDP ratio, primary mortgage bank total assets, and National Housing Fund disbursements. Real estate market stability was measured by a composite Real Estate Stability Index constructed from residential property price volatility, vacancy rate data, and housing loan delinquency rates. The theoretical framework integrates Minsky's financial instability hypothesis, the housing credit channel model, and the collateral constraint theory into an original housing finance stability nexus model, which generates testable predictions about the non-linear relationship between credit depth and stability. Johansen cointegration analysis, fully modified ordinary least squares, and the Granger causality analysis were employed. Results confirmed a cointegrating relationship between mortgage credit depth and real estate stability, with a positive long-run coefficient (0.41, p < 0.01) at moderate credit depth levels, transitioning to a negative coefficient at high credit-to-GDP ratios consistent with Minskian instability dynamics. National Housing Fund disbursements showed a consistently positive stability effect across all regimes. The study provides the first empirically validated housing finance stability model for Nigeria, offering original theoretical and policy insights for the Federal Mortgage Bank of Nigeria and the Central Bank of Nigeria. Keywords: housing finance, real estate stability, mortgage credit, Minsky hypothesis, Nigeria