The adverse economic conditions in Nigeria are exerting a negative impact on multiple sectors, including real estate. This impact has, in numerous ways, affected individuals, households, and businesses.
Most affected are individuals and households living in rented accommodation who are now groaning under the weight of rent increases, especially at city suburbs where tenants are contending with over 40 percent rise in the past 12 months.
The combined impact of a galloping inflation, which peaked at 28.9 percent in December 2023, volatile exchange rate, naira devaluation and the removal of petrol subsidy has seen commodity prices go through the roof.
“The Nigerian economy has made a significant impact on the real estate market and developers in the country with fluctuating prices of building materials, inflation and currency devaluation,” Olubisi Shaola, a property law expert and a real estate developer said.
Shaola, who is also the CEO of Finn Grey Projects, added: “The market has seen increased construction costs due to changes in the prices of building materials, labour and other inputs; developers face challenges in managing construction budgets and timelines as a result.”
This state of affairs, according to him, has made it difficult for property developers and contractors to deliver affordable housing for over 75 percent of Nigerians who lack access to desired accommodation. There has also been a ripple effect on prices of houses, especially newly constructed buildings, as well as delayed delivery of projects.
“Perhaps, tenants are the worst hit as rents are rising almost on a monthly basis. Because new houses are not coming to the market as expected, landlords are taking advantage of this situation and jacking up their rents to a point that unsettles most tenants, especially those in the cities,” Cyril Adetiba, a real estate consultant, said.
Within the past 12 months, low-income settlements have seen rent increases, with one room self-contained rising from N150,000 to N250,000; two-bedroom flat has increased from N400,000 to N600,000, while a three-bedroom apartment has risen from N500,000 to N800,000 in some locations.
Some highbrow locations have also seen rent increases as a two-bedroom apartment now goes for N1.2 million up from N850,000, while three bedrooms go for N1.8 million and above, up from between N1 million and N1.2 million in January 2023.
“I rented this place in December 2022 but packed in late January 2023. I paid N650,000 for the three-bedroom apartment that I live in. My rent was due January this year and my landlord told me his house was no longer for N750,000 but N1 million. When I asked him why; he told me the cost of maintaining the housing has more than doubled because building material prices and labour cost have gone up,” Godday Nwokedi, a businessman at Alaba International Market stated in an interview on Thursday, February 8, 2024.
Many other tenants had almost similar stories to tell of how their landlords have increased their rents significantly, citing rising building material prices, inflation, and cost of maintaining the houses.
On Thursday morning, the price of cement, which is a major building component, had gone from N5,300 per 50kg bag to N7,000. It was gathered that one of the major cement producers is having issues with his factory. So, what is in the market is old stock in the hands of major distributors.
Again, it was gathered that the price increase stemmed from an increase in the cost of raw materials such as limestone, clay, and gypsum which, in turn, is attributed to the increase in haulage and fluctuations in exchange rate.
Similarly, there has been increases in the prices of other building materials, especially rods, also called reinforcement. 8mm rod previously sold at N255,000 per tonne is now N518,000; 10mm that was sold for N442,000 now goes for N520,000, while 12mm and 16mm rods that sold for N446 is now N515,000. The 20mm and 25mm earlier sold for N442,000 now command N530,000 price, depending on location.
The price of paint, another major building component, has also gone up. The price of a 20-litre container has increased from N8,000 to between N10,900 and N35,000, depending on the brand and location, while retailers and distributors sell for between N12,500 and N45,000.
The cost of labour has also gone up with artisans who were charging between N3,000 to 4,000 per day last year now asking for between N6,000 and N8,000, depending on the location.
A major reason cited for this increase is transport fare to site. Some of the built environment professionals have also raised their scale of fees indirectly to reflect the inflationary trend.