Wale Adebayo is the Managing Director and Chief Executive Officer (CEO) of Tri Edge Properties Ltd. In this interview with MOYOSORE SALAMI, he speaks on the challenges facing Nigeria’s real estate sector, particularly the struggle to provide affordable housing for low and middle income earners. He highlights the factors driving up housing costs in the country and what must change to make homeownership more accessible for Nigerians.
As a real estate professional, you are aware that agent fees in the rental market have skyrocketed, often reaching 90 per cent or even 100 per cent of the yearly rent. From your perspective, what factors within the industry have allowed this practice to become so prevalent?
As a real estate developer, I mainly focus on creating new properties rather than leasing them. But I can see a few reasons agent fees in the rental market have become so high.
First, demand for rental properties is extremely high, especially in major cities. This gives landlords more leverage and allows agents to charge premium fees for their services. In many areas, the supply of rental properties is limited, which makes competition for good housing even more intense. This empowers agents to set higher fees, as renters are often left with no choice.
Beyond that, managing the rental process takes significant time and effort. Agents handle marketing properties, conducting viewings and paperwork; and their fees often reflect the workload involved.
However, this has undoubtedly made renting more expensive for the average Nigerian. At our firm, we focus on development, ensuring that the housing supply grows to meet demand. This is one way we can help ease the pressures that have contributed to high agent fees.
Does this practice contribute to the growing housing crisis in Nigeria?
Absolutely, high agent fees are a significant burden on renters, many of whom already struggle to afford basic living expenses. When agent fees reach 90 per cent or even 100 per cent of the yearly rent, they create an extra financial burden for renters, making it difficult and nearly impossible for people to secure a decent place to live. This situation often forces individuals and families to look for cheaper housing options, which can lead them to subpar living conditions. It can also push them further away from their jobs or essential services, resulting in longer commutes and higher transportation costs. For some, these fees are so daunting that they may choose not to rent at all, which can lead to higher vacancy rates and a stagnant rental market.
High agent fees also impact household finances in a broader sense. When people spend large portions of their income on housing costs, they have less money for necessities like food, healthcare, and education. This creates a cycle of economic hardship, making it challenging for many of them to achieve financial stability or improve their living conditions. The affordability crisis isn’t just about high property prices; it’s about all the additional costs that come with securing a home, including agent fees.
Why and how has real estate become the new economic frontier?
Real estate’s evolution as the new economic frontier is driven by several reasons. It creates job and increases economic activity. Its impact is felt across various sectors of the economy.
Population dynamics have increased demand for housing, commercial spaces, and infrastructure. As more people migrate to cities in search of better opportunities, real estate becomes a vital sector for economic expansion.
Investment potential is another reason. Real estate is seen as a stable and appreciating asset, attracting both local and international investors. Real estate developers and investors see this demand as an opportunity to create new developments and increase their returns. Many are drawn to the sector not just for rental income but also as a hedge against inflation.
Technology is also shaping the industry. Developers are now embracing eco-friendly and energy-efficient building methods, appealing to a growing market that prioritises environmental responsibility. This shift creates opportunities for new investments, tenants looking for sustainable options and innovative developments.
What makes the real estate sector attractive to investors, and what opportunities does it present?
The real estate sector offers stable and predictable returns. Rental income provides a steady cash flow, making it a preferred choice for investors looking for passive income. Over time, property values tend to increase, allowing investors to build wealth through capital appreciation.
Investing in real estate also allows investors to diversify their portfolios, spreading risk across different asset classes. Unlike stocks and bonds, property values tend to rise in response to inflation, making it a reliable long-term investment, which can help stabilise overall returns.
Property demolitions by the government have become a recurring issue in the country. Are there justifications for such?
The issue of property demolitions in Nigeria often sparks considerable debate. Government agencies typically justify these actions based on several reasons. Whether these justifications are valid can vary greatly depending on the context and specifics of each case.
Take for instance the issue of illegal construction. Government agencies often argue that some properties were built without the necessary permits or regulations. If a property is indeed constructed without proper permits, demolishing it may be justified to uphold zoning laws and regulatory frameworks. However, the process for obtaining permits can sometimes be opaque or lengthy, leading to frustrations among developers and property owners.
Secondly, buildings that are structurally unsound or pose safety risks to the public may be demolished. The validity is that if a property is genuinely unsafe, demolition may be necessary. However, transparency and proper assessments should be conducted to determine safety risks, ensuring that demolitions are truly warranted.
Environmental concerns can also prompt demolition. Properties located in ecologically sensitive areas or flood zones may be demolished to protect the environment or manage risks. If a property indeed poses environmental hazards, the justification is valid. But it is crucial that affected property owners have input in the decision-making process and are provided with fair alternatives.
Demolitions are also sometimes carried out to make way for new infrastructure projects – roads or social amenities – with the goal of urban renewal.Urban planning is necessary for city development and removing outdated or poorly located structures can be justified. But there should be a clear plan in place, with people involvement and fair compensation for affected residents. So, their validity often depends on transparent processes; communities should be involved in the planning decisions and those affected must be adequately compensated and fair alternatives provided.
A balanced approach that respects property rights while ensuring public safety and urban growth is important to address the issues surrounding property demolitions. Demolitions should not be carried out arbitrarily or as a means of displacing people without just cause.
What are the challenges in providing affordable housing for low and middle-income earners in Nigeria?
Despite multiple schemes implemented by various governments around the country, affordable housing remains elusive to the average Nigerian.To support the government’s extensive urban development, the private sector is responsible for nearly 90 per cent of urban housing, but even this is not enough to meet demand.Various factors contribute to this issue. The rapid growth in urban population is driven by high fertility rates and the migration from rural areas to cities. There is a crucial need for employment, enhanced infrastructure and opportunities that housing programme managers must consider.
The high cost of construction materials, due to manufacturing and mining expenses, is another issue. Many building materials are imported, making them expensive due to foreign exchange fluctuations.
The lack of skilled labour and local technology further increases costs, as developers often have to hire foreign workers and skilled artisans from nearby countries.
Extravagant building designs also contribute to affordability issues. Some architectural plans are not tailored to Nigeria’s economic realities, making them too costly for the average Nigerian. Also, there is still a strong preference for traditional materials, like concrete and sandcrete blocks, which can be expensive compared to alternative building technologies.
How has government policies and infrastructure development shaped the real estate industry?
Government policies and infrastructure development play a significant role in shaping the real estate industry. Initiatives that facilitate housing loans, rent control measures or inclusionary zoning, and urban planning regulations all impact housing affordability and market stability particularly for first-time homebuyers or low-income housing.
Infrastructure development also directly affects property values. The development of roads, public transit systems, and airports can significantly enhance property values and accessibility. Areas well connected by transportation are often more desirable for both residential and commercial real estate. Reliable access to essential services like water, electricity, and waste management is also critical for property development. When infrastructure is lacking, real estate growth slows down, and property values stagnate.
Will this growth be sustainable or are we heading towards a market bubble or a potential crash?
While no market is ever completely risk-free, the country’s real estate sector looks bright and promising. Despite the challenges posed by declining purchasing power, there remains a significant and growing demand for real estate in Nigeria. The current housing deficit, estimated at around 28 million units, indicates that the demand will remain high. Experts estimate that the country requires approximately 700,000 new homes yearly to bridge this gap, which suggests that the risk of a market crash is low.
However, challenges such as declining purchasing power and economic instability could slow growth. The real estate market will remain resilient as long as demand continues to outpace supply, but sustainable policies and investment strategies are essential to maintaining long-term stability.
What signs should investors and homebuyers watch out for in the coming years?
As an estate developer with a focus on creating spaces rather than leasing them, investors and homebuyers should pay attention to several key trends.Demographics are shifting. With a growing young population, there will be an increasing demand for modern, affordable homes. Locations with good schools, parks, and amenities will continue to attract buyers.
Government policies around housing and infrastructure development should also be closely monitored. If governments begin to promote affordable housing or ease regulations around construction, it could create opportunities for new developments.
Keeping an eye on infrastructure projects, like new roads or public transport, is also crucial, as these can significantly increase property values in nearby areas.
The rise in the use of technology in real estate is another trend to watch. Digital platforms for buying and selling properties are changing how transactions happen. Investors and homebuyers should look for developments that incorporate smart home technologies or sustainable building practices, as these features are becoming more desirable.
Economic factors such as interest rates also play an important role and the overall economic environment will provide insights into when it might be a good time to buy or invest. Lower interest rates often mean it’s more affordable to finance a home or investment property.
Finally, at Tri-Edge Properties, our promise is to make your dream home come true. We focus on creating quality developments that meet the needs of modern living. By staying ahead of these signs and trends, investors and homebuyers can make strategic choices in finding properties that will thrive in the future.
