Consequent upon the rising cost of construction triggered by persistent inflationary trends, many developers are embarking on an upward review of home prices to maximise profits, while property owners are raising rents in major locations by as much as 50 per cent.
It was gathered that the housing market is at the moment witnessing an unprecedented crisis, as the development is affecting sales and off-takers’ ability to buy new homes, which are considered too exorbitant. It has also forced renters to either downsize apartments or relocate from the city centres to suburbs, where rents are relatively affordable.
The country is battling over 22 million housing deficit. The rising cost of critical materials like cement and other essential components of building production such as cement, and blocks, and foreign exchange volatility have negatively impacted building materials prices, as well as delivery timelines for projects.
It was found that sales have been low in the past six months, especially at the low-income segment of the market where many Nigerians struggle with low purchasing power for off-plan property offerings and outright purchase of homes despite developers’ new focus on studio, one, two- and three-bedrooms apartments.
Notwithstanding this, developers and landlords keep increasing prices of products in line with economic reality. Since the middle of last year, rental and sales prices of houses and landed property in Lagos, Enugu, Rivers States, and Abuja witnessed over eight per cent, seven per cent and nine per cent increases according to findings. The unabated inflation and high cost of credit has further triggered over 50 per cent increase in the market.
House rent has also gone up across the market, affecting both new and old projects. For instance, a mini-flat that used to go for N500,000 yearly in mid-2023 has risen to N650,000 in the market. Rent for a three-bedroom flat has increased from N800,000 to N1.5 million. A two-bedroom apartment in Lagos environs now goes for N1 million from N600,000 per year.
In strategic locations like Lekki, Lagos, a one-bedroom flat, which rent used to be between N1.2 million and N2 million, is now N1.7 million and N2.5 million. Also, a three-bedroom apartment is currently rented out between N5.5 million and above N8.5 million per year from the previous N4 million and N6.5 million depending on the location. In other cities like Port-Harcourt, and Asaba, two-bedroom and three-bedroom apartments have gone up from N800,000 to N1.5 million and N2.5 to N3.5 million respectively.
For the Federal Capital Territory (FCT) Abuja, a three-bedroom terrace house in strategic areas that was previously N5 million, now goes for N8 million and above. A detached four-bedroom house now costs about N35 to N40 million and above from previous N25 million.
Justifying the increase in housing prices recently, a Lagos-based developer, who pleaded anonymity said: “Nigeria’s current economic climate, marked by over 27 per cent inflation, poses challenges. Coupled with foreign exchange rate fluctuations and supply chain disruptions, construction costs have surged, with construction material costs rising by 54 per cent.
“In response to this, we have made a strategic decision to adjust prices, striving to absorb most of the added costs. Our clients are requested to make an additional payment based on the property’s initial purchase value.”
The President, Real Estate Developers Association of Nigeria (REDAN), Dr Aliyu Wammako, expressed dismay at the performance of the real sector in home sales, describing it as a ‘doom’ situation.
“Housing sales are at their lowest level currently. When people are not having purchasing power and everyone is struggling to feed their family first, how do you expect sales to go up? We are witnessing a doom in this sector,” he said.
He bemoaned the inflationary trend in the price of building materials, which he said, has never happened before. He said the government must focus attention on the sector by ensuring prices of building materials are reduced.
He said the government should introduce price control or make alternative arrangements for the prices of building materials to come down, especially cement produced in Nigeria.
Chairman, Nigerian lnstitution of Estate Surveyors and Valuers (NIESV), Kano branch, Mr Lasisi Abidemi, said the property market has been saturated. “Some banks that closed their branches due to requisition are offering such property for sale. Individuals and private property are also making their properties available for sale,” he said
Abidemi admitted that there has been an increase in rents as a result of the increase in building materials prices. For instance, he said an apartment that was previously N300,000, landlords are asking between N400,000 to N420,000 yearly.
“In Nasarawa GRA, a three-bedroom flat, which used to be between N2.5 to N3 million, landlords are asking for N4m and N4.5m. This development is not peculiar to high-choice areas, in suburbs a one-room self-contained house that usually goes for N200,000, now goes for N300 to N320,000. This is a more than 50 per cent increase,” he said.
The Chairman of NIESV, Rivers State branch, Hamilton Odom, said the crisis bedevilling the real estate industry is a reflection of the general situation in the economy.
He stated that although housing sales are happening, the economic instability has affected it slightly. In rents, he explained that a two-bedroom apartment in some locations in Port Harcourt is now as high as N1.5 million, three-bedroom N2 million as against previous rates of N700,000 and N1 million depending on the neighbourhood.
He said: “The moment a landlord in one location increases rent, Landlords in another location will do the same. It is a common market. However, one critical thing is that property investment is quite profitable and the payback period is shorter now. What takes 15 or 18 years to recoup before, you can use 10 years to recoup depending on the amount of investment. Our population is increasing every day but we don’t have a commensurate increase in the housing stock. ”
A former NIESV chairman, Lagos branch, Adedotun Bamigbola, said despite the economic situation in the country, there is bound to be sales as the financial capabilities in the industry is divided into the upper and middle/lower cadres.
He added that certain classes like the low-income may be completely kicked out of the market.
“Some people who used to play in the upper class may drop to the middle and those who used to play in the middle may have dropped to lower level and definitely people at the lower level will drop out totally maybe this year or may not be this year.
“But construction is still ongoing, there is price appreciation in the market, people are still buying imported materials for finishing projects and there are still various sale models like off-plan, pre-selling and others. These schemes still ensure that sales go on and people still send letters for offers to buy one property or the other.”
He pointed out that estate operators who play in the low-income market will experience sales dip more than those who operate in the upper-income market, where transactions are still ongoing. Those who operate in the upper end of the market, he said, have more buffers in terms of capability to soak off economic shocks.
Bamigbola further argued that with high inflation, it is now difficult to get six-digit rent in some locations in Lagos, adding that it is now seven digits.
“This is because of movement in cost, upward inflation and people still can’t afford to live in such locations for whatever reasons that could include closeness to their place of work, or having acclimatised to the area. Rent has moved upward, especially in the city centres where there is heavy competition and this can be mirrored with land value appreciation over the years,” he said.
Source: The Guardian