Nigeria’s real estate is an important sector of the economy, as it significantly impacts the nation’s economic and social development. However, the housing sector faces some challenges, and this is particularly due to rising costs. These costs affect every aspect of housing, from construction, land acquisition and even affordability of these homes.

According to the Guardian, the cost of building materials has increased by over 75% in the last 12 months, and it has become a concern to Nigerians because of its direct impact on the supply, affordability and accessibility to housing, especially to low and middle-income earners. Understanding what drives these rising costs and their impact is important for developing effective strategies to address this issue.

We’ll first discuss the factors that contributes to the rising costs in the Nigeria housing market, they include:

1. Economic Inflation

Inflation in Nigeria has always been a persistent issue that influences every sector, including housing. As inflation rates increase, the purchasing power of people decreases, leading to higher costs for goods and services. The high cost results in increased prices of construction materials, labor and land. The prices of last year can definitely not be the same as this year.

2. Demand-Supply Imbalance

With growing population and rapid urbanization, the demand continues to rise, while the supply remains insufficient. This imbalance drives up prices as competition for available housing gets tough. Additionally, the limited supply of affordable housing is a factor to consider, as many Nigerians cannot afford it, which is definitely worsening the affordability crisis.

3. Cost of Construction Materials

The cost of construction materials in Nigeria has been increasing fast. Factors resulting in this increase include dependency on imports, the international supply market, and local production problems. Basic construction materials like cement and steel have increased in price. Local production is often hindered by inadequate infrastructure, high energy costs, and regulatory barriers, resulting in higher costs for both developers and buyers.

 

Impacts of Rising Costs on The Housing Market

1. Houses Have Become Relatively Expensive

Rising costs directly affect the affordability of housing. As construction and land prices rise, the cost of buying a home becomes very high for many Nigerians, especially the low and middle-income Nigerians. This makes it extremely difficult for people to buy houses or afford high mortgage rates, which leads to a decline in homeownership, forcing people to rent houses.

2. Impact on Real Estate Investment

Increasing costs also affect real estate investment. Developers face higher construction costs, which decreases profit margins and discourages them from building more houses. There are always fluctuating costs in the real estate market which can greatly affect investment decisions, making people not consider investing in real estate.

3. Rental Market Dynamics

The rental market is also affected by the rising costs. People rent houses because they cannot afford to buy or build homes. Even at that, they are still affected by the rising costs, this is because, as the cost of new properties increases, landlords pass these costs to their tenants to pay higher rents. The increased demand for rental properties due to unaffordable home prices further drives up rental prices, making housing even less accessible. This puts additional financial pressure on renters, while some are already struggling with low earnings and rising living costs.

 

Government Intervention On These Rising Costs

Affordable Housing Initiatives

In response to the housing crisis, the Nigerian government has launched several affordable housing initiatives aimed at providing low-cost housing to its citizens. These initiatives include public-private partnerships to develop affordable housing projects and schemes like the National Housing Fund (NHF), which provides low-interest loans to potential homeowners. However, bureaucratic inefficiencies and corruption often hamper the effectiveness of these initiatives.

Regulations on Property Development

The government has also implemented regulations to streamline property development processes. Measures to reduce the time and cost associated with obtaining construction permits and land titles have been introduced. Efforts are also being made to curb speculation and ensure that land is used for its intended purposes. While these regulations are steps in the right direction, enforcement remains a significant challenge.