The absence of a vibrant mortgage market and high interest rates directly correlated with inflation are some key drivers of Nigeria’s housing deficit.
The average mortgage rate in the country is currently over 20 per cent, although stakeholders believe the emergence of the Nigeria Mortgage Refinance Company (MRC) raises hopes of a reduction.
The latest report from the National Bureau of Statistics (NBS) showed headline inflation at 9.3 per cent year-on-year (y/y) in October.
Industry estimates suggest that about 100,000 new houses are built each year in Nigeria, compared to estimated demand of 700,000 units.
The deficit nationally stands at 17 million units and the estimated cost of bridging this gap is N59.5 trillion ($300 billion).
Numbers released by the Central Bank of Nigeria (CBN) recently showed that compared with many other countries, construction is highly expensive in Nigeria.
For instance, the cost of building a three bedroom apartment in Nigeria runs up to $50,000, compared with $36,000 in South Africa and $26,000 in India.
Analysts believe that following the CBN’s recent circular in June excluding certain imported items (such as building materials) from the official foreign exchange window, building costs are expected to rise even further.
Analysts at FBN Capital Limited stressed that the housing sector may get the needed boost expected from the new budget when the recently appointed minister hit the ground running.
According to the analysts, “Given the soft macro environ- ment (weaker crude oil prices, twin devaluation of the naira), we have seen a slowdown in housing supply in view of the government’s lower revenue profile. We are waiting for the 2016 budget but the signals are that it will be expansionary. The new minister, Babatunde Fashola, is likely to add considerable energy to the FGN’s housing programme.”
The experts pointed out that there are massive investment opportunities for investors given that the sector is largely untapped.
They said: “We see the start of monetary easing next year.”