The haemorrhaging economic condition in Nigeria is impacting negatively on various sectors including the real estate market and its supply chains.
This impact is, in more ways defining the economy of the sector in the first quarter of 2024 as more renters groan under the weight of price increase in the real estate market forcing individuals, households and businesses to face uncertainty.
The meteoric rise in foreign exchange rate to N1450/$ was a major negative development for the real estate sector as it affected supply chain significantly and price of reinforcements have also forced contractors and property buyers to renegotiate the bids of contractual agreement.
Most affected are individuals and households living in rented accommodation who are now groaning under the weight of rent increases, especially at city suburbs where tenants are contending with over 50 per cent rise in the past one year.
This is even as the combined forces of exchange rate, galloping inflation, volatile exchange rate, naira devaluation and the removal of petrol subsidy has seen commodity prices shooting in rooftops.
Some tenants who spoke to LEADERSHIP had almost similar stories to tell of how their landlords have increased their rents significantly, citing rising building material prices, inflation, and cost of maintaining the houses.
Undoubtedly, the price of cement is fast rising to N7,000 as well as a hike in price of other building materials in the construction business sector. This is forcing property developers to reduce construction activities by more than 50 per cent as more sectorial businesses continue to suffer more price shocks within the haemorrhaging economy.
Besides disposable income, which has gone down considerably, prices of building materials, especially cement and reinforcement (rods), have increased by 70 percent. These are products of the current economic disruptions.
Checks by LEADERSHIP revealed that rental fee source is a top discussion in commercial offices, warehouse, short term, hospitality and service apartments triggered by weak market transactions, volatility of the FX market that is struggling within the grappling economy.
Similarly, there has been increases in the prices of other building materials, especially rods, also called reinforcement. 8mm rod previously sold at N255,000 per tonne is now N518,000; 10mm that was sold for N442,000 now goes for N520,000, while 12mm and 16mm rods that sold for N446 is now N515,000. The 20mm and 25mm earlier sold for N442,000 now command N530,000 price, depending on location.
The price of paint, another major building component, has also gone up. The price of a 20-litre container has increased from N8,000 to between N10,900 and N35,000, depending on the brand and location, while retailers and distributors sell for between N12,500 and N45,000.
Speaking in a Media chat, former Redan Auditor, Southwest, Emmanuel Oyelowo hinted that, “With this scenario of consuming FX market, price volatility and spiral inflation, many homeowners will witness a surge in rent defaults under their management with zero payment default. We believe that the rental market is viable, but landlords will feel the impact of the current market slowdown if they don’t innovate.”
Also speaking, the managing director of PWAN Group, Frederick Okpaje explained that tenants are the worst hit as rents are rising almost on a monthly basis, adding that, new houses are not coming to the market as expected, and landlords are now taking advantage of this situation and jacking up their rents to a point that unsettles most tenants, especially, those in the cities,” he enthused.
Commenting on the development, one of the house occupants around Ogba area in Lagos, Mr. Segun Odubanwo said, he paid N1 million for the three-bedroom apartment that he lives in. “My rent was due January this year and my landlord told me his house was no longer for N1 million and now N1.2M. This is coming just less than one year I packed into the house. When I asked him why; he told me the cost of maintaining the housing has more than doubled because building material prices and labour cost have gone up,” he said.
Reacting, Economic Consultant and Chief executive director of Centre for the Promotion of Private Enterprise, (CPPE) Dr. Muda Yusuf urged the CBN to address price inflation and put proper regulations in appropriate sector of the economy,
He suggested a reform of the foreign exchange market adding that this would reduce volatility and stimulate forex inflows.
He however cited the need to Address forex liquidity issues through appropriate policy measures by Fixing the structural problems to boost the productivity and competitiveness of domestic firms.
He also addressed the challenges of high transportation and logistics costs stating that this would bring restoration of normalcy and good order at the ports of the nation to reduce transaction costs.
He stressed the need to reduce import duty on intermediate products and raw materials for industries to reduce production costs, especially, in the light of the sharp depreciation in the exchange rate.