2023: Election, inflation to shape real estate market
The housing shortage has been a persistent problem in the nation, getting worse every year. It is made worse by the population boom, which is expanding by roughly 2.6% yearly. The efforts of successive governments have just begun.
In order to close the country’s 28 million housing gap, it will take around N21 trillion. The housing shortage began at seven million in 1991 and worsened to twelve million by 2007. And it was N20 million by 2019.
As compared to other African nations, the nation’s housing problems seem insurmountable. There are 1.8 million housing shortages in Ghana, 3.7 million in South Africa, and 400,000 in Ethiopia.
The problem has been linked to Nigeria’s population growth, which is currently exceeding the country’s housing supply at a rate of 2.6% per year.
In a report on Nigeria’s housing market, the Bank of Industry had stated: “With a growing urban population, rising building prices, and diminishing household income, access to affordable housing is becoming more challenging for millions of Nigerians.”
A different study by the Federal Mortgage Bank of Nigeria, titled “Institutional turnaround for the next level,” found that even though the Federal Government allocated N470 billion for housing in 2022, the industry would need trillions of naira to close Nigeria’s housing gap.
According to the report, of the estimated 206 million people in Nigeria, 95.1 million were expected to be living in poverty, making it impossible for them to access their own homes.
However, the BOI underlined certain crucial issues that must be resolved in order to reposition the housing market in Nigeria, highlighting the need for significant financial intervention in the housing value chain to spur development in the industry.
Greater collaboration with the organized private sector is essential for seizing opportunities in the real estate market, according to a BOI report.
Increased costs of housing
According to a previous survey, low-income housing costs are quickly becoming out of reach for the average worker.
This was linked in a research released by Nigerian Proptech, Estate Intel, to the ongoing increase in housing costs, including rental and purchase pricing.
In line with the increase in cement prices from N2,450 to N2,510 in 2021 to N3,900 to N4,200 in 2022 for Dangote Cement, it was claimed that construction costs had also gone up. In addition, it mentioned how land values had increased over the previous five years, with regions like Epe experiencing over 100% growth.
While all of these expenses had probably contributed to growing property prices, the report pointed out that no growth in discretionary income had been seen as a result, making residential real estate unaffordable for the average Nigerian.
More Nigerians are living below the poverty line as a result of the country’s rising housing costs, particularly the rising cost of rent. Toye Eniola, the executive secretary of the Association of Housing Companies of Nigeria, claims that the increase in the cost of living, which has continued to drive more people below the poverty line, is mostly due to the improper management and bad execution of economic policies.
“Now, almost everything in our nation is based on the price of the foreign exchange market rate,” he remarked. The government’s incompetence and failure to stabilize the currency rate are doing more harm to the economy and making people, especially young people, poorer and poorer without any sign of improvement.
Kolade Adepoju, the chief executive officer of Riel Homes, cited inflation as the cause of the increase in housing costs.
He declared, “Inflation, which is a global issue, is the first factor that we can claim is contributing to the increase in the cost of housing. Every country and industry are suffering greatly from inflation. The price of homes will be impacted because the cost of materials has grown by at least 70% to 200%.
“The second thing I’ll mention is the absence of regulatory authorities, particularly in Nigeria. Several businesses and people are simply raising prices as they choose because there are no regulatory organizations in place. Even though there is inflation everywhere, regulatory organizations should nevertheless control prices. It could be handled in a way that has no negative effects on the populace.
“Greed is the third point I’ll make, which is kind of a continuation of the second one. In this area of the planet, there are many greedy individuals. They simply profit from what isn’t. Many people use an increase in the exchange rate as justification for raising the price of home, but in reality, they might not be as affected as they claimed. For instance, we can find everything we need for construction in Nigeria locally and of extremely high quality.
The issue of the ongoing hike may be viewed from a number of angles, according to Chudi Ubosi, managing partner of Ubosi Eleh & Co.
“Property development has remained to be an expensive endeavor from land acquisition to acquiring consent or good title to government permits and then the actual construction, which requires purchasing building materials at the current high prices,” he said. In order to start the process of recouping their investment, the developer wants to charge a premium when the project is finished.
Real estate is an investment much like any other investment, according to another viewpoint. Investors work hard on their assets to make sure they always receive the highest dividends possible.
Moreover, the majority of Nigerian areas’ inadequate infrastructure and services, which the developer would typically be responsible for paying to support community growth, are typically not taken into account. The final result of these expenses is an increase in the cost of building homes, which is ultimately passed on to the potential tenant in the form of increased rents.
Dr. Akinsola Olufemi, National President of the Nigerian Institution of Builders in Facility Management, put up a plan of action and emphasized the necessity of strengthening the local currency and reducing reliance on imported building supplies as a means of lowering housing costs.
“The cost of steel reinforcement is anticipated to decrease now that Ajaokuta Steel Rolling Mills is operating again. The cost of cement should be regulated by the government in comparison to what is available in other West African countries.
One of the main problems that the Nigerian real estate market faced in 2022 was building collapse. Around the nation, no fewer than 61 buildings collapsed. In 2022, Lagos State would account for 20 structural failure instances, or 48.7% of all cases, according to a report by the Building Collapse Prevention Guild.
According to Kunle Awobodu, the immediate past president of the Nigerian Institute of Building, it is an anomaly when new buildings routinely collapse but certain older structures are still standing after many years, indicating that something is wrong.
This gets us to a building’s expiration date, Awobodu stated. A building is thought to have a lifespan of roughly 60 years. Yet, if we take the Wiston Castle in London as an example, it has been standing there since 1070. Going back to Nigeria, it will be found that the Water House owned by Candido Da Rocha on Lagos Island was built in 1874 and was still stable when we performed a structural integrity test on it in some of the building surveys completed by the Nigerian Institute of Building in 2020.
The former president claims that Nigeria has a systematic problem where individuals who are building don’t pay attention to or follow the building control requirements.
He said that only qualified individuals with the appropriate licenses should develop buildings.
He stated, “Those who are trained in building technology, have expertise in building technology, and are licensed to construct buildings should handle the construction stage of buildings. If something goes wrong in this instance outside of natural calamities, competent builders are responsible.
Election year
Toye Eniola, executive secretary of the Association of Housing Companies of Nigeria, said that no one can accurately predict the situation of the real estate market in 2023.
“I don’t think we should expect something spectacularly different from the current scenario,” he remarked. This is due to the fact that 2023 is an election year, and by the time the new administration is sworn in and things have settled, the year would be coming to an end. It will depend on making a sensible choice for a housing-friendly government that views housing as a fundamental and essential component of restoring the economy from its current state of decline and stagnation for any discernible improvement to occur in the housing sector.
Festus Adebayo, the executive director of the Housing Development Advocacy Network, remarked that the housing market in 2022 worked successfully only for the very wealthy, particularly in the sectors of luxury residences and commercial real estate, but that it had failed to meet the demand for affordable housing.
The real estate industry in 2023 would be greatly influenced by the election, he claimed. Apathy prevails in the run-up to elections because investors are unsure of whether they will receive the right return on their investment or not. Nonetheless, improvement in the sector might be visible soon after the presidential elections, depending on who wins, especially at the presidential level.
Most crucially, I do not envision a struggling real estate market in 2023; rather, I envision a market with a new administration that would accelerate the sector’s growth. As I mentioned earlier, the election winner’s interests would determine the extent to which the market began to recover in 2023.
Eniola, however, asserted that if the current state of the housing market continues, the government must declare a state of emergency in the housing industry.
