By Grace Alegba
Low household incomes, limited mortgage access, high land and construction costs, infrastructure deficits and inefficient land administration are driving housing unaffordability in Lagos, a new report says.
The report was unveiled at the hybrid “Beyond Rent: A Lagos Housing and Capital Forum” organised by GTI Investment Group in Lagos.
The forum had the theme: “Housing, Capital and the Future of Lagos,” where the GTI’s 86-page research, “Beyond Rent: Mapping Lagos’ Housing Led Capital Expansion” was unveiled.
The overview of the publication was presented by Head of Research and Strategy at GTI Investment Group, Mr Abiodun Ogunniyi.
The report said reducing cement prices alone would not resolve Nigeria’s housing deficit.
It said modelling showed that even an 82 per cent reduction in cement prices could reduce house prices by only about 14 to 15 per cent.
According to the report, the binding constraints to homeownership include low incomes, high mortgage interest rates, limited mortgage access, infrastructure deficits, land administration challenges and high construction costs.
It said mortgage penetration remained extremely low, with only about 0.6 per cent of Nigerian households currently using mortgages.
The report also identified a growing gap between rent inflation and headline inflation in Lagos.
It said annualised rent growth exceeded 40 per cent on mainland corridors and reached about 51 per cent in prime areas of the Island, compared with headline inflation of 15.9 per cent as of June.
The findings showed that 80 per cent of respondents surveyed considered Lagos severely unaffordable.
It identified both absolute and relative housing unaffordability, noting that even households earning about N500,000 monthly could face rent burdens of between 40 and 60 per cent in some mainland locations.
The report also warned that apparently cheaper housing on the outskirts of Lagos could become more expensive when commuting costs were included.
Using Marina as a benchmark, the researchers analysed 3,200 property listings across 15 submarkets and found that transportation costs could erode much of the savings from lower rents in peripheral locations.
The report identified infrastructure as a major determinant of property values, noting that properties located one to two kilometres from rail stations could command significant value premiums.
It said Lagos was developing into three broad housing markets: capital preservation locations, productive employment corridors and peripheral areas where the city is expanding.
The report also highlighted a mismatch between housing demand and supply.
It said properties below N15 million accounted for about 55 per cent of demand but represented only a small share of supply, while luxury properties above N200 million accounted for a significant portion of new developments.
“This is a capital architecture problem,” the report said.
It noted that developers were increasingly producing luxury housing while affordable and middle income homes remained undersupplied.
The report urged government to improve land administration and convert informal land holdings into formal, bankable assets that could be used as collateral for mortgages and development finance.
It also called for greater mobilisation of long term institutional capital into housing, particularly pension funds.
According to the report, pension fund administrators currently have more than N31 trillion in assets under management, with about 75 per cent invested in government securities.
It said a portion of such long term funds could be redirected into productive sectors, including housing, through instruments such as Real Estate Investment Trusts and other structured investment products.
The report also recommended infrastructure value capture mechanisms, betterment levies and urban regeneration financing to support housing development.
It said the government should focus on mid-density housing corridors where large numbers of working class residents live, while developers should consider opportunities in the underserved affordable housing segment.
The report further advised households seeking mortgages to ensure repayments remain within 30 to 35 per cent of household income and urged financial institutions to adopt location-driven underwriting.
It said stronger collaboration among policymakers, developers, financial institutions, academics and capital market operators was required to close Lagos’ housing financing gap.(NAN)(www.nannews.ng)
Edited by Vivian Ihechu