Inflation, high interest rates spike sales, rents by 40% in major cities

Nigeria’s housing market has recorded a spike by about 40 per cent in cost of leases and sales in the first half of 2023, according to newsmen.

Amid inflation headwind, rising interest rates and attendant dip in new investments, the cost of lease or purchase of residential properties in major cities like Lagos, Abuja, Enugu, Port Harcourt and Kano has increased, and beyond reach of many.

Though the development is partly dynamic and demands still resilient, stakeholders have complained about the lack of standards and price control, thereby giving opportunities for operators to exploit the weaknesses of the system in terms of indiscriminate increase in prices of materials.

The Monetary Policy Rate (Interest Rate) has climbed to 18.75 per cent, from 16.5 per cent at the beginning of 2023. This implies that the cost of capital has increased by 12 per cent within six months, discouraging borrowing and reducing the volume of money circulation in Nigeria’s economy.

For the real estate and construction sector, construction cost has also risen and the eventual result is the delay in real estate supply, which can further exacerbate the pressure already on property prices.

For several months, there has been an increase in the price of cement and other components, such as blocks and rings in the building materials market. Prices of paints, reinforcement and sanitary fittings, sand, roofing sheet, tiles, as well as granite, rose by over 70 per cent.

Rentals have remained resilient in core city centres with sustained growth in affordable and highly-accessible neighbourhoods. Sales have remained relatively stable, driven mainly by diaspora spending and focus on off-plan properties.

Activities are concentrated in the new gated neighbourhoods and towns across these locations. Developers are more concentrated on apartments (one, two and three bedrooms), terraces, as their demand and supply have remained strong.

Property experts have seen similar trends nationwide albeit the percentage change might not be the same for different classes of property.

In Lagos, increase in rent is happening in new and old buildings, which is affecting the entire market. A mini flat (a room and parlour self-contained) in Agidingbi, Ikeja that used to be N400, 000 yearly has increased to N600,000. In Ogba, an average three-bedroom flat has increased from N800, 000 to N1.3 million per annum.

In posh areas like Lekki Phase 1, one bedroom flat, which used to range between N800,000 and N2 million, now goes for N1.5m and N3 million, while a three bedroom flat now rents for between N6 million and ₦8 million per year from N4 million and N7 million.

A property developer and Managing Director, NISH Affordable Housing Ltd, Dr Yemi Adelakun, reckoned that housing development in the first half of the year slowed down due to elections and transition to a new government.

Similarly, removal of subsidy, which led to increase in prices also contributed to low activities in the housing market.

“Tension created by the elections and the outcomes, as well as the after effect of naira crunch in the economy generally affected housing in all parts of the country, especially Lagos, Port Harcourt and Kano. Increases in cost of construction materials expectedly affected prices in the housing market.

“Even wages payable to artisans increased drastically. Supply of new houses may reduce in the short and medium term and the full effect on prices will only be realized in the second half of the year.”

He said the high-end housing market remains strong as some buyers have resources to buy regardless of inflation.

“Mortgages, which have been inadequate, will become even more unattractive with increase in interest rates. This will have adverse effects on both demand and supply of housing,” he said.