HOW INFLATION IS AFFECTING NIGERIA’S REAL ESTATE MARKET

Inflation is no longer just a distant economic term in Nigeria; when I was younger, I used to only associate inflation with the abroad, the talk about the economic meltdown didn’t seem to interest me. This is now a reality that affects every household, business, and investor. As the cost-of-living soars, fuelled by everyday rising fuel prices, a depreciating naira, and increasing interest rates, the Nigerian real estate market is feeling the heat like never before. Whosh! it very tough out there.

Let’s look at a few things:

The Rising Cost of Property Development

For developers, the cost of constructing new properties has skyrocketed. Remember then when 1 million naira would build you a house, not play house or a toy house, or tree house, lol, a standard bungalow! Cement, which once sold at an affordable rate of ₦950 – ₦1000, has overly tripled in price within a short period. Now look at essentials building materials like steel, tiles, electricals and plumbing fittings have also become significantly more expensive due to the fluctuating exchange rates and high import costs. As a result, many developers are either slowing down construction projects or passing these costs onto buyers, which me, I can’t even fault anyone and it’s making homeownership an even steeper climb for the average Nigerian.

Affordability Crisis for Buyers

For aspiring homeowners, inflation has made it increasingly difficult to afford property. Salaries have not kept pace with the rising cost of goods and services, and you could also say, what of mortgage? Hmmm, the rates are at record highs. Many middle-class Nigerians who once dreamt of owning homes now find themselves priced out of the market, like who did we even offend? Even those who had saved diligently for years now discover that their savings have lost significant purchasing power due to the naira's depreciation, or they’ve spent it all on the ever-increasing house rents.

Rent Prices Are Soaring

The kind of toll Inflation is taking on the rental market, at this rate most tenants may be dragging spaces with the occupants of under bridge. With the cost of living increasing, landlords are forced to raise rents to match their own rising expenses, should we blame them? I’ll leave that to you to answer. From power supply issues to maintenance costs, property owners have no choice but to transfer these burdens onto tenants. Many families are now forced to downsize, relocate to less expensive areas, or, in some extreme cases, move back in with relatives to cope with the financial strain. A case of I left home to feed home but na home come dey feed me. It is well o.

Investment Uncertainty

Real estate has long been considered a safe investment in Nigeria, but inflation has introduced a level of unpredictability that is making some investors hesitant. You’ll hear some people say I spent 200 million to get this building up but I’m renting it out for 5 million per year, when will I recover my money? While property values continue to rise, the demand for real estate is slowing due to affordability issues. Investors who once saw property as a reliable hedge against inflation now face liquidity concerns, as selling property has become more difficult in a cash-strapped economy. Now how do we even begin to grow this economy?

The Way Forward

Despite these challenges, there is still hope. Some solutions, finally! The Nigerian government and financial institutions need to introduce policies that support affordable housing, such as lower mortgage rates, tax incentives for developers, and innovative financing solutions for buyers. Real estate stakeholders must also explore alternative building materials and cost-saving construction techniques to make housing more accessible to everyone, especially the middle class.

For those looking to invest in real estate, strategic planning is key. Long-term investments in well-located properties still hold promise, and if it’s in the forest you find land, there is promise as development is expanding. Also rental income remains a viable means of wealth preservation in uncertain economic times. So, investing in real estate is valuable. While inflation continues to be a pressing challenge, resilience and adaptability will determine who thrives in Nigeria’s evolving real estate market.

At the heart of this crisis is the everyday Nigerian, struggling to keep up with the changing tides. As we navigate these uncertain times, one thing remains clear, housing is not just a commodity; it is a fundamental need. Addressing inflation’s impact on real estate isn’t just an economic issue, it’s a matter of social stability and national progress. A case of “let the poor breathe!” Imagine where Nigerian’s economy would be if half the population can afford their own homes?