Rising cost of building materials, labour push up housing prices, rent
Building materials and labour costs have once again taken a leap in the real estate sector following rising in inflation and exchange rate in the economy, raising fears among prospective builders of even harsher times ahead.
Already, manufacturers are passing the rising cost of raw materials to their customers, adding to concerns that inflation, which increased by 15.63 per cent in December from the 15.4 per cent recorded in November 2021, may put further pressure on housing.
The Guardian gathered that construction materials such as cement, steel and finishes and labour have experienced a significant increase in their prices, leading to a rise in development costs of commercial high rises, offices and other buildings.
Prices of essential building components like sand, blocks, roofing sheets, tiles, paints and wood have witnessed an increase of over 30 per cent in the past months across the country.
For instance, the price of a 50-kilogramme bag of cement goes between N4, 200 and N4, 600. The official exchange rate stands at N415, while the black market rate hovers between N560 and N570. Most of the importers of building materials claim to have imported their products using the black market rate.
It was gathered that most building materials are still imported, so, the rising exchange rate is compounding the woes of property developers.
The rise of material prices is causing developers to consider whether or not to initiate new projects that haven’t already started for both residential and commercial construction.
The increasing cost has also put the hope of becoming potential homeowners by Nigerians in limbo. About 60 per cent of the total cost of building construction goes to materials while the remaining 40 per cent is spent on labour. Currently, the development has affected the price of rentals in major cities, with homeowners increasing their rent by 50 per cent.
According to the Royal Institution of Chartered Surveyors (RICS), “increased global demand in the construction sector, combined with the multiple and complex impacts of the pandemic and logistic issues, have resulted in unprecedented shortages, delays and ultimately, increased prices of materials and labour across the economy.
“Construction productivity has largely recovered from the initial shock brought by the pandemic and in some instances, significant efficiencies have been achieved as a result of new working practices.”
Experts, who spoke to The Guardian said the government’s intervention is needed to curb or stabilise housing cost. They also called on the government to encourage local manufacture of building materials.
Professor of Estate Management, University of Lagos, Timothy Nubi, said 60 per cent of building materials low-income housing and 80 per cent of materials for posh areas such as Ikoyi and Victoria Island were import-dependent. “The price will be galloping depending on the exchange rate and inflation in the country,” he said.
Nubi, who lamented the disappearance of wood manufacturing firms, said, “Until we produce materials locally, cost of construction would remain high as much as 500 per cent. It should not be shocking to anyone.”
He said the implication is that there would not be any affordable housing and the cost of construction will be very high. “As far we have a high cost of construction, mortgage system will not work. Many people will not be able to afford mortgages.
“Builders will begin to use less expensive, inferior materials imported from certain parts of the world, which will lead to building collapse,” he said.
According to the founder and Director, UNILAG Centre for Housing and Sustainable Development (CHSD), there is less
government can do to arrest the situation as a response to demand for housing takes time.
He queried why Nigerians should be importing iron rods after billions of naira was invested in Ajaokuta Steel Mill, Osogbo Steel Rolling Mill and Delta Steel Company? “The failure of these projects is what we’re facing now. Our past leaders handled them poorly,” Nubi said.
Executive Director, Shelter Watch Initiative/Job Centre Impact (JCI), Segun Olutade, said the labour cost is responding to the rising cost of food and other goods and services in the markets, various forms of taxes introduced by government and associations.
While stating that the rising cost of cement, labour and other building materials will continue to rise, Olutade called on government at all levels to encourage Nigerian youths, especially those that cannot read nor write to work as labour on sites.
“Apart from giving incentives, all forms of taxation should be abolished. Serious mobilisation should be provided to encourage our youths to take over as labour on sites.
“Also, laws should be put in place to ensure local contractors patronise indigenous labour and artisans. Regulations to ensure labour intensive jobs are well-remunerated needs to be put in place to encourage our youths.”