- December 16, 2022
- Posted by: admin
- Category: Real Estate
There are concerns that despite the nation’s construction and real estate sectors contributing N20 trillion to the Gross Domestic Product (GDP), many Nigerians are unable to own homes and rent property in major cities in the country.
The scenario is not a surprise to the operatives as Nigerians have long been complaining about the skyrocketing property prices over the past few years. Apart from the effects on construction cost variations on projects that is forcing investors to shift completion dates, some developers have scale down their units and re-planned their schemes to meet yawning gap in the residential property market.
Studies further show that affordable housing is becoming increasingly out of reach for many low- and even moderate-income renters in the nation’s urban centres and their surrounding suburbs, as supply did not keep pace with this growth in demand, vacancy rates decreased, the average number of people living in a rental unit increased, and, in most areas, rents rose.
A recent report by National Bureau of Statistics (NBS) showed that the construction and real estate sectors contributed N20trillion to the GDP in the first three quarters of 2022. While construction services earned N12.9tn real estate contributed N7tn to the GDP.
The report further indicated that construction contributed 9.5 per cent to nominal GDP in the third quarter of 2022. This was higher than the 9.26 per cent it contributed a year earlier and higher than the 7.95 per cent contributed in the second quarter of 2022.
It also grew by 18.92 per cent year-on-year in the third quarter of 2022. On a Quarter-on-Quarter basis, the sector growth rate was placed at 16.38 per cent.
The contribution to nominal GDP in Q3, 2022 stood at 4.96 per cent, relative to 5.27 per cent recorded in the third quarter of 2021 and higher than the 4.95 per cent reported in the second quarter of 2022.
The sector however dropped 28.75 per cent points compared to the rate of 47.67 per cent recorded in the same quarter of 2021.
NBS statistics further revealed that real estate services in nominal ters grew by 9.13 per cent, higher by 0.50 per cent points than the growth rate reported for the same period in 2021 and lower by 3.68 per cent points compared to the preceding quarter.
However, experts heaped the blame on increase in property prices due to inflation, disparity in exchange rate, persisting unfavourable policies and a full-blown liquidity crisis, as well as speculative investments and rising cost of building materials.
President, Nigerian Institute of Quantity Surveyors (NIQS), Micheal Shonubi, said: “The costs have gone up making the contribution of construction and real estate to the GDP to go up, unfortunately, the prices and rents are making the houses unaffordable.
“More-so inflation has also eaten deep into the disposable income of prospective subscribers or tenants. It should be noted that prices and rents are determined by costs of construction among other factors.”
Shonubi told The Guardian that the GDP figures are not based on increased output per se, rather on increased costs caused by the aftermaths of COVID-19 lockdowns, which created production shortages and led to disruption in supply chain logistics.
“The Russian invasion of Ukraine shortly after the lockdowns were lifted created economic crisis around the globe leading to the worst inflation in more than 40 years in some western countries. Since most of the construction materials used in Nigeria, especially for finishing are imported, the costs also bear the effects of this global inflation.
“Furthermore, most developers both for private and economic reasons, don’t patronise construction professionals/practitioners as they see the professional fees payable as a cost that can be eliminated and a savings on the total cost of the project.”
He said if the government is realistic and wants to lower costs or ensure affordable rents, it has to encourage investors in local production of the imported materials through tax breaks, provision of requisite infrastructure to aid production, as the raw materials are available locally in abundance. “Cultural orientation/perception of our people, who see buildings constructed of local materials as substandard has to also change,” he said.
The President, Nigerian Institute of Town Planners (NITP), Mr. Nathaniel Atebije, called for investment and development of good quality local building materials to meet needs in terms of cost. “We need to encourage research institutions such as Nigeria Building and Road Research Institute (NBRRI) and educational institutions where studies can be undertaken to produce lower cost homes.
“Such buildings should be designed with considerations of energy efficiency and environmental friendliness. Financial incentives such as low interest facilities should be given by government to local producers of building materials to enable them produce at affordable costs, which will then impact on rents and cost of ownership.
“Affordability of houses either for rent or ownership is factored by cost of building materials cost of land and infrastructure. The cost of these inputs to housing grows everyday due to the galloping inflation, taste for foreign building materials and the provision of infrastructure by developers instead of government. It is worsened by the level of poverty in the country. Wages are low, value of money has been in summersault for quite a while,” he said.
Atebije told The Guardian that the number of people without houses continues to increase because of lack of implementable public policy on housing, adding that home ownership should be seen and enforced as a fundamental human right.
“The government, especially those responsible for formulating policies and others, who legislate on them have not provided a workable environment for responsive policies to be formulated; and even the policies that have been made do not have the political will and cash-backing for implementation.
“It is important that lack of physical planning contributes to challenge of affordability and ownership of houses. If towns and cities were planned, location of most suitable locations for housing would have been determined.
“Due to lack of planning, locations of housing areas either by government or private developers are in incidental places. Hence, they may be far from other components in town, thereby increasing the challenge of commuting in a place without good transport infrastructure,” he said.
He said the increase in the GDP in both sectors had not translated to more jobs for the professionals. “Both public and private developers prefer to give their works to quacks because of the cheapness of their fees. Unknown to them, the cost of development would be far higher than what a professional would have done for them.
“At the design stage, technicians and draughtsmen are engaged, who copy designs blindly. The end result could be over-design or under-design. Either way, negative consequences such as fatal and incessant collapses of buildings, construction failures and other environmental hazards detrimental to the wellbeing of inhabitants will be the result.”
He said the government also patronises quacks and foreigners. “Professional services are contracted to non-professionals at cheap rates just to populate budgets. Consultancies are given out to persons, who are not qualified as rewards for political patronage.
“Despite the legislation on local content in provision of services, a good number of projects are awarded to foreigners with claim that they have more experience. Granted that the foreigners have more experience, why can we not turn the legislation the other way around to give the jobs to Nigerians and compel them to engage more experienced foreigners for better quality output.
“We normally give poser questions to people in the political class and others in executive cadre who award such contracts if they had experiences of governorship or legislation before they were voted into power. And the answer was always negative. So why can they not allow Nigerian professionals to get the awards and then engage non-Nigerians, who may have more knowledge to assist them.”
According to him, most housing developments are undertaken by the private sector and they are basically out for business to make profit. “The high costs of land and the absence of infrastructure is making housing provision to be very expensive thus unaffordable to the generality of Nigerians.
“Invariably therefore, the high costs of building materials, high costs of land coupled with the provision of infrastructure sometimes by the private developers are the major causes for both houses to be unaffordable houses and rents becoming high,” Atebije declared.
Source The guardian 5/12/2022