Despite efforts by both the government and private sector operators at giving more Nigerians homes to live in and, by so doing, narrow the supply deficit, homeownership level in the country remains low at less than 5 percent.
This level becomes very disturbing when compared with what obtains in other countries of the world.
Analysts have adduced many reasons for the low level of homeownership in Nigeria, highlighting absence of functional mortgage system as a major cause. Mortgage availability, accessibility and affordability, they note, remain big issues in the country’s housing market.
This means that home seekers are unable to buy houses through mortgage because where mortgage available, it is neither accessible nor affordable to many people who are either unemployed or under-employed, judging from what they earn as salary.
“Nigerians are unable to access or afford mortgage because 95 percent of deposits in mortgage institutions are short-
term call money; the remaining 5 percent of deposit has tenure of less than 365 days. Again, there is poor savings culture as a result of poor economy such that people live from hand to mouth. There is also lack of funds, which results in high interest rates,” Chudi Ubosi, principal partner, Ubosi Eleh + Co, said at a forum in Lagos.
Sonnie Ayere, CEO, Dunn Loren Merrifield, agrees, noting that in comparative analysis of what obtains in Nigeria, Ghana and South Africa, whereas mortgage contributes about 40 percent of housing finance in South Africa, and 3 percent in Ghana, our much smaller West African neighbour, it is less than 1 percent in Africa’s largest economy.
Houses are few and largely unaffordable in the country because both development and delivery are fraught with challenges including unstructured and informal housing market, legal and regulatory issues, poor institutional framework and the need for relevant government interventions.
“From all these, it becomes clear why the housing market growth rate in Nigeria is still very low”, said a mortgage expert who did not want to be named.
The expert also attributed low home ownership level in Nigeria to difficulty in registering a property in the country which takes an average of 12 procedures, lasts nearly four months (except in Lagos State which has improved on this) and costs about 15 percent of the property value.
This, the expert noted, contrasted sharply with what obtains in neighbouring Ghana, where it requires just five procedures, 34 days and 1.3 percent of the property value. In New Zealand, property could be registered online in two days at a cost of 0.1 percent of property value.
Because of this coupled with difficulty in doing business and poor regulatory environment in the country, private equity firms which could have invested in large scale housing production are staying away. This is why, as against 80 inter-regional private equity firms looking to invest in South Africa’s real estate market, 30 in Egypt and 40 in Kenya, only 16 of such companies are interested in Nigeria’s real estate market.
“Though on account of demographics and strong buying power, Nigeria is seen as a green field and an investment destination, investors are slow in moving into the market due to unfavourable business environment,” the expert stated.
But Ubosi assured there were creative ways through which Nigerians could own homes without waiting for mortgage that will never come. One of such ways, he said, was to buy land, wait and sell at a later date. He explained that appreciation in the value of the land gives bulk sum to reinvest and purchase elsewhere.
Another way, according to him, is to team up with three, four or five people to set up a special purpose vehicle for crowd-funding aimed at buying property.
“You can buy land and develop gradually; you can buy off-plan which can be 30-40 percent cheaper; you can also buy shell units and finish at your pace with choice of materials. You can also join a cooperative, or investment club,” Ubosi advised, adding, “but be realistic about your needs and budget.”