72% of young Nigerians are interested in owning a house but highlight fund, fraud, and access to innovative products as challenges
A new study conducted by Culture Intelligence from RED reveals that with 72% of young Nigerians interested in owning a house, fraud, access to funds, and provision of innovative real estate products remain a daunting challenge.
After a boom period marked by high oil prices and double-digit growth a decade ago, the Nigerian real estate sector was significantly impacted by the country’s economic downturn, as industry growth dropped off, remaining subdued in 2017 and early 2018.
In a survey conducted by Culture Intelligence from RED, 66.7% of its national focus group say they are interested in owning a home or investing in real estate, 16.7% replied ‘Maybe’, and the rest said ‘No’. The three motivating factors highlighted by the focus group include access to funds, innovative products, and brand trust. Others are word-of-mouth and relatable marketing (with language and platforms that directly address their needs).
According to real estate expert and chairman Dr Somadina Anene, “if concerted efforts are not urgently put in place to address Nigeria’s housing deficit, which has continued to increase astronomically, it may grow to 25 million in 2021. According to Anene, the housing deficit, which stood at 17 million about four years ago, can be traced to difficulties such as a cumbersome land administration system, high cost of building materials, rising poverty, high interest rate on loans, among others.
Based on another study, home ownership could be extended to more than 50% of the population if homes were built for those with an annual income of N340,000, or about US$2,000. Incremental building and cooperatives could meet the needs of another 25% of the market. The construction sector is also currently unable to meet this demand due to systemic weaknesses such as lack of skills at all levels, weak organisational capacity, lack of access to finance, and lack of standardisation of building plans and materials.
“The housing and ownership opportunities for young Nigerians are minimal, and the rising inflation is not making things easier,” said an expert. With the constant increase of unemployment and living costs, it is difficult for more young people to invest or even think about owning a home. For example, Lagos is home to 22 million people and counting, more than double those in New York and London combined. Nevertheless, an estimated two-thirds live in face-me-I-face-you buildings, slums and crowded shanties. There are real estate opportunities for such a large population, but the most crucial factor that needs to be addressed is poverty among young Nigerians”.
While some households can achieve affordability with supplementary, informal income, this is not counted in loan origination procedures. This affordability analysis also shows that low-income earners can afford housing units at N2 million ($13,333.33), and such analysis of dwelling units helps to understand affordability. If such knowledge can help improve housing demand, it can, arguably, reduce homelessness and the desperate demand to get anything sufficient.