Inflation, general elections, and skyrocketing housing prices are some of the causal factors that would spur growth and sustain the economic drivers of the real estate sector in 2023, according to real estate experts’ projections of some of the key factors that would influence the development of the real estate market in 2023.
Stakeholders and industry experts however, outlined some critical areas to be addressed to reposition the housing sector in Nigeria, while stressing that adequate financial intervention was needed in the housing sector value chain to boost development in the real estate sector.
The economic analysts asserted that the ballooning population in urban cities would contribute to the development of the housing sector in 2023, adding that, the present challenge had been traced to Nigeria’s population growth which is currently at 2.6 per cent per annum and currently outpacing the provisional housing system in the country.
This is even as the Bank of Industry (BOI) in a report on Nigeria’s housing sector, affirmed that, “with a growing urban population, increasing construction costs, and declining household income and access to affordable housing is becoming more difficult for millions of citizens.”
The BOI, however, outlined some critical areas to be addressed to reposition the housing sector in Nigeria, stressing that adequate financial intervention in the housing value chain was required to boost development in the sector.
“Increased partnership with the organised private sector is crucial to unlocking opportunities in the real estate market,” the BOI report stated.
Another report by the Federal Mortgage Bank of Nigeria titled “Institutional turnaround for the next level,” indicated that, although the federal government budgeted N470billion for housing in 2022, the sector would require trillions of naira to close Nigeria’s housing gap.
The FMB report showed the estimation of 206 million persons in Nigeria, which about 95.1 million lived below the poverty line, and as such, it was difficult for them to have access to their own homes.
Hyperinflation &Soaring Housing Prices
The cost of low-income houses is fast becoming unaffordable to an average worker, as earlier stated.
It stated that, there had been a corresponding rise in construction costs, as cement prices had increased from N2,450-N2,510 in 2021 to N3,900-N4,200 in 2022 for Dangote Cement. It also stated that land prices have been on the rise, with areas such as Epe recording over 100 per cent growth in the last five years.
It noted that, while all these costs had likely impacted rising home prices, a resultant increase in disposable income had not been recorded, making residential real estate unaffordable for the average Nigerian.
The rising cost of housing, particularly, house rent, has eroded the purchasing power of Nigerians, pushing more people below the poverty line.
According to the executive secretary, Association of Housing Corporations of Nigeria, Mr. Toye Eniola, poor implementation and mismanagement of economic policies were largely responsible for the upsurge in the rising cost of general living which has continued to push more people below the poverty line.
He noted that, virtually everything in this country is determined by the price of foreign exchange market rate. This ineptitude of the manager of the country and their inability to stabilise the exchange rate is causing more damage to the economy and people are becoming poorer and poorer without visible hope for the people, especially the youths, he said.
The chief executive officer, Riel Homes, Kolade Adepoju, blamed inflation for the rise in housing cost.
He said: “First thing, we can say inflation is affecting the rise in the cost of housing is inflation and it is a global thing. Inflation is eating deep into every nation and industry. The cost of materials has increased by a minimum of 70–200 per cent, so, automatically, it is going to affect the price of housing.
“Secondly, I will say it is the lack of regulatory bodies, especially, in Nigeria, because, we have no regulatory bodies, many companies and individuals are just increasing the price as they wish. Regulatory bodies should regulate the price even though there is inflation everywhere. It could be managed in a way that will not affect the people.
“The third thing I will say which is like a continuation of the second one is greed. Many people use a rise in exchange rate as an excuse to increase the price of housing but in the real sense, it may not be affecting them as they portrayed it. For example, everything we use for construction in Nigeria can be sourced locally with very good quality.”
The managing partner, Ubosi Eleh & Co, Chudi Ubosi, noted that, the issue of the incessant hike can be looked at from a couple of perspectives.
He said: “property development has continued to be an expensive venture from land acquisition to obtaining consent or good title to government approvals and then the actual construction, which involves buying building materials at the current high prices. The result is that, upon conclusion, the developer wants to charge a premium to enable him/her to begin the process of recouping their investment.
“Another perspective is that real estate is an investment like any other investment. Investors sweat their investments to ensure they are getting maximum dividends from them at any time.”
While proffering solution, national president, Nigerian Institution of Builders in Facility Management, Dr Akinsola Olufemi, stressed the need to strengthen the local currency and reduce reliance on imported building materials as a way of cutting down housing cost.
“Now that Ajaokuta Steel Rolling Mills is back on stream, it is expected to impact positively on the cost of steel reinforcement. The government should control the price of cement relative to what is obtained in other West African nations,” he pointed out.
Election Year
Speaking on the real estate projection in 2023, the executive secretary of Association of Housing Corporations of Nigeria, Mr. Toye Eniola, stated that, nobody can really say what 2023 will look like.
He said: “from my perspective, l do not think we should expect any spectacular thing different from the current situation. This is because 2023 is an election year and by the time the new government is sworn in and settles down, the year would be winding up.
“For any visible change to happen in the housing sector, it will be a function of choosing wisely a housing-friendly government that regards housing as a subset and key element of reviving the economy from current degradation and stagnation.”
The executive director, Housing Development Advocacy Network, Festus Adebayo, noted that, the housing sector in 2022 performed well solely for those at the top, particularly, in the areas of luxury homes and commercial real estate; however, it has failed in the area of providing affordable housing.
Eniola, however, claimed that, if the housing market situation persists as it is currently, the government needs to declare a state of emergency in the housing sector.
Asset Expansion By 5.2% In 2023
The chief executive officer, Financial Derivative Company(FDC), Bismarck Rewane, also projected a sustained growth driver for the real estate sector in 2023, noting that, the real estate sector of the Nigeria economy will expand by 5.2 per cent in 2023.
According to Rewane, the sustained growth of the real estate sector would increase demand for real estate assets.
The FDC boss, noted that, the sector’s contribution to GDP would increase by 6.5 per cent while contending that, this growth would be sustained in the new year due to high population and urbanisation growth would be the major drivers of the trajectory in both short and long terms.
The expansion, according to Rewane, will happen on the back of the sector’s sustained growth, among other drivers.
He said, though the traditional risks in the sector includes; high unfriendly interest rate environment, increase in the cost of building materials, and poor land acquisition policy will remain, he added that, private consumption will also increase, meaning that, there will be a potential upside for corporate which, in turn, will translate to higher earnings and greater profit margin.
Rewane sees positive and bright outlook for the economy in 2023 as, according to him, exchange rate adjustment will narrow the import-export foreign exchange (IEFX)-parallel gap from 747 in 2022 to 680 in 2023.
On the strength of the above, it is expected that real estate which mirrors and follows economic conditions will see growth in the new year as increased economic activities will mean increased demand for real estate assets.
Source: leadership
