In the last few years, the Nigerian real estate market has recorded exponential growth, and is still expanding. The growth, according to the Chairman of one of the leading real estate companies, Millennium Group, Eze Munachino, is as a result of the secured investment opportunities real estate is creating for many Nigerians, whose earnings are now diversified because of the yield from their real estate.
However, Munachino, noted that while investing in real estate, especially in Nigeria offers countless opportunities including gaining financial prosperity and building wealth, there are many challenges that can limit what an investor can make and even the capacity to invest. One of those changes, he said, is affordability.
He argued that with a growing middle-class population, rapid urbanization, and young demographics compared to stronger economies, Nigeria possesses all the key factors for real estate investment, but despite all of these, financing and affordability, according to him, have remained problems for property developers and prospective homeowners.
“Millions of Nigerians struggle for affordable housing amidst the real estate boom,” he said.
Explaining the dynamics of the sector, Munachino said a real estate investment is a financial strategy that involves the management, ownership, purchase, rental, and/or sale of a property for profit. “Though, there are several ways to invest in real estate, they all rely on similar economic factors to earn profit. The first factor is that the property must increase in value. Furthermore, the costs involved in owning and maintaining the property must not exceed its increased value,” he said.
Using the real estate market in Enugu State as a case study, he noted that the sector in Enugu is characterized by over inflated prices of properties for sale and rent, while the actual value of the property is way less than the price it is being leased or sold for. For him, affordable housing is housing units that are affordable by the section of society whose income is below the median household income, hence affordable housing should address the housing needs of the lower or middle income households, he insisted.
“Affordable housing becomes a key issue when a majority of the population is not able to buy houses at the market price. This can be likened to what is happening in Enugu where below 30% of its population can afford a standard home and at least 5% have no access to housing and in other words, above 5% of the population of Enugu residents have no accommodation/housing”, Munachino said.
The implication of the development, according to him, is excess supply with little to no demand as a result of exorbitant prices. For most working Enugu residents, the earning capacity is generally low and makes it practically impossible for the average person to save towards owning a house, as well as the dwindling economic fortunes in Nigeria, which dims the capacity of individuals to own a house.
He noted that disposable income of the people remains the primary factor in determining the affordability, and as a result, it becomes the increased responsibility of the public and private sector to cater to the rising demand for affordable housing.
“Enugu’s housing disparity reflects the state’s huge economic divide. Most residents that cannot afford these rents and housing live in large numbers in a very ample living space resulting in congestion. Access to decent, affordable housing would provide critical stability for these families, and lower the risk that vulnerable families become homeless”.
In his opinion, affordable housing is important to the economic vitality of communities and hence affordable homes can attract and retain employees to a community- a selling point and a competitive advantage for area employers. As well, affordable homes for him, also support the local workforce so they can live close to their jobs as shorter distance to work allows workers to spend more time with their families while the community benefits from reduction in traffic congestion, air pollution, and expenditures on roads.
In revitalizing communities, the construction of affordable homes, according to him, can also help to stimulate economic growth with healthy mix of housing options, from market- rate and affordable rental housing, single- family homes, duplexes, as well as developments for seniors (old people), ensures opportunities for all individuals to improve their economic situation and contribute to their communities.
The need to throw more light on real estate investments, according to him, is because affordable housing notion is largely misunderstood by the public as myths and misconceptions about affordable housing developments are based on fear around negative stereotypes, property values, and the change it brings to neighbourhoods — all of which are common arguments in opposition of a new affordable housing community.
In reality, the lack of safe, affordable housing is costing Nigerian cities in several dramatic ways. “Cities that fail to step up with affordable housing solutions drive out residents, lose potential workers, and discourage growth in their local economies. While those who already have safe and stable housing may not feel the true cost of poverty, the effects are real and can have a serious detriment on our communities,” he argued.
For him, high housing prices can slow down a local economy, leaving jobs unfilled and less spending power in a community. But, when affordable housing is readily available, more opportunities become available for people at all income levels. More money is available for spending in a community, and long-term change can begin to take root. Enumerating some factors that driveproperty and rental prices, he blamed them on the price of land and the high cost of construction.
“There is a constant increase in prices of construction materials and labor in the market. When you construct, and the cost of construction is high, the sales price or the rental price will have to be high in order to breakeven on the investment. In the-same vein, when the price of land is exorbitant, whatever is built on it will have to recoup the cost of land and cost of construction for the investor.
“So, when it comes to price control, it boils down to valuation control, valuation fraud control and inflation control”, he concluded.
But the above factors are where both the government and the private sector, according to him, should beam their lights on, if government wants to make the real estate industry any better for Nigerians.
Source : This Day