Abuja – February 24, 2024 – From our Stand (104).
According to data from the National Bureau of Statistics (NBS), Nigeria’s headline inflation rate increased from 21.82% in January 2023 to 29.90%, in January 2024. This trend significantly Affected the cost of building materials in real estate development and also affected rents.
As Nigeria grapples with fluctuating inflation rates, understanding how this economic phenomenon affects real estate investments becomes crucial for investors and stakeholders alike.
Inflation is a sustained rise in the general price level of goods and services over time, Inflation in Nigeria, like in many other economies, is a complex phenomenon influenced by a variety of factors.
Real estate plays a crucial role in Nigeria’s economy, providing income and contributing to the GDP.
The escalating costs of living in Nigeria has had profound effects on the housing sector, prompting significant shifts in accommodation patterns and preferences, two notable consequences of these rising costs are the forced relocation of many families to different settlement levels and the redefinition of accommodation standards across the country.
As inflation accelerates, the purchasing power of the Nigerian Naira diminishes. Real estate, often considered a hedge against inflation, can serve as a store of value, allowing investors to preserve their wealth in a tangible asset.
Inflation can influence rental income dynamics, this is because property owners may adjust rental rates to keep pace with rising living costs, potentially benefiting landlords.
Numerous contractors and developers have stated that, they are having trouble providing over 75% of Nigerians who do not have access to affordable houses, with cheap housing as a result of the inflation.
Along with project delivery delays, there has also been a domino impact on housing prices, particularly for recently built properties.
Costs for cement and other components that are used in the manufacturing of blocks and rings—components that use cement as a primary ingredient—are experiencing price surge every day.
Paints, sanitary ware, reinforcement, sand, roofing sheets, tiles, and granite were reported to have increased in price by more than 70%.
Developers in big cities are not having the greatest of times as they struggle to maximize profit, this is as construction materials frequently consume the largest portion of building production budgets.
Major cities including Lagos, Port Harcourt, Abuja, Kano, Ibadan, and Enugu have seen a decrease in demand for highbrow Areas rental housing and a rise in demand for cheap homes as a result.
As real estate operators in Nigeria bemoan the escalating costs of doing business that force contractors to either renegotiate current contracts or accept their suspension, the federal and state governments’ planned provision of affordable housing units, particularly for those at the bottom of the pyramid, will not only remain a pipe dream, but the ensuing frustration will further push the populace towards slums and may exacerbate the existing poor housing conditions plaguing the populace .
Conclusively, A large number of Nigerians who are low-income workers are under pressure from the challenging economic situations, some are unable to afford decent accommodations and instead choose to live in rural areas with discounted rent.
With low-income earners making up the majority of the population, it is anticipated that the government at all levels would make significant investments in housing projects to relieve the strain.
Offering housing will not only motivate them to make more constructive contributions to the economy, but also lessen the existing economic dissatisfaction that drives many of them to commit crimes.
