By Alex Chiejina
LAGOS (Sundiata Post) – Nigeria’s prevailing economic trend is putting immense strain on the nation’s real estate sector and have affected the property market as sales have nosedived considerably. SundiataPost investigations reveal increasing rate of empty residential buildings in places like Lekki, Victoria Island, Ikoyi, in Lagos. The same appears not too different in Abuja, the nation’s capital.
Affordability has been eroded on the back of the economic slowdown as squeeze in consumers’ purchasing power and rising cost of imported building materials have accounted for a considerable proportion of the final sales price of residential units.
Latest data from the National Bureau of Statistics (NBS) show that in Q1 2016, the real estate sector contracted by -4.9% Year-on-Year (y/y) compared with growth of 0.8% recorded in the previous quarter. The construction sector also contracted by -5.0% y/y in Q1 2016.
The inflation data for April show that housing, water, electricity and gas segment prices rose by 13.7% y/y, compared with 12.8% recorded in March. This component has a 14.7% weighting in the index.
Recently, the Federal Mortgage Bank of Nigeria (FMBN) stopped its estate developers’ loans scheme due to paucity of funds. In May 2016, the minister of power, works and housing, Babatunde Fashola, SAN directed the Federal Mortgage bank of Nigeria (FMBN) established to provide liquidity to the Nigerian mortgage sector and affordable housing to the low and medium income segment and the Federal Housing Authority (FHA) to expedite action on the delivery of 1,000 affordable housing units over the next one year.
This appears to have led the recent signing of the Memorandum of Understanding with the Federal Housing Authority (FHA). The two institutions are jointly exploring options for housing delivery through a number of on-going schemes such as the Accelerated Housing Scheme for selected federal MDAs and the Federal Integrated Staff Housing Scheme for federal civil servants.
In developed economies like Hong Kong, China and the US, housing investment focused policies have been identified as a strategic tool deployed in stimulating the economy. Analysts hope that the Federal Government will explore this option to drive growth given the current fiscal constraints.