Rising house prices trigger drop in young homeowners

Prospect of young Nigerians owning houses is waning speedily following the harsh economic conditions, which have affected many businesses.

Consequently, many can barely pay salaries, while salary increments are becoming a lot more difficult.

Not even the new minimum wage regime had made much difference as the purchasing power of young people has remained low because of the high inflation rate put at 11.37 per cent as at April 2019 by National Bureau of Statistics (NBS).

The fall is largest among those aged 20 to 34 leading to a drop from the proportion of homeownership from 51 per cent in 1991 to only 24 per cent in 2016.

For instance, in 1999, it was learnt that the average annual salary was equivalent to 23 per cent of the average house price, it however, dropped to only 11 per cent in 2012 to 2017, meaning houses are much more expensive proportionally than they were 15 years ago.

With dysfunctional mortgage system and salaries increase rate getting much slower, buying a property has become harder for many young homeowners.

The Guardian investigation showed that a self contained apartment costs between N10 million and N20 million in the Lagos Island, while the same goes for N8 million – N10 million in the Mainland.

Similarly, a two-bed room apartment sells for between N15 million to N35 million depending on the locations and the quality of furnishing.

A newly married man, Babajide Odeyemi, who was lucky to work in a blue chip firm, said he was able to get a property at Lekki because his firm had a cooperative where he could borrow money.

He stressed that majority of young people could not afford homes because of high cost of houses except for few fraudsters.

Another young worker, Michael Onyeka said, renting is a more preferable option given the cash and carry model of property market in Nigeria.

According to him, the high cost of houses had led to significant increase in renters with about 30 per cent increase in renters in the same age group from 56 per cent to 73 per cent because fewer people are able to pay for homes on their own at all.

A Lagos based realtor, who pleaded anonymity, said many prospective home owners are also turning towards relying on a relationship to access the property market in order to combat the rising cost, which had lowered possibilities of home ownership.

“While between 1994 and 2006 individual home ownership made up 31 per cent of the market, by 2016 it dropped to 20 per cent with the difference being made up in couples, which went from 64 per cent of the market to 77 per cent in the same time.

“Those buying in other arrangements also dropped from five per cent to three per cent”, he noted.

The Guardian learnt that the change comes as a result of the dropping values of salaries.

Also, lack of appropriate mortgage system and the harsh business environment that made many investors to shun the real estate sector have compounded the system.

Managing Director of Property Gate, Mr. Adetokunbo Ajayi, attributed the scenario to low salaries, high cost of houses because of high cost of building materials and land as well as lack of effective mortgage system .

He stressed that although, it is more profitable for young people to buy property through mortgage because they have age on their sides. “The terms of mortgage system in the country is a disincentive because they are too difficult to pay,” he said.

According to him, it is a systematic problem. “Today, only a few bank will be willing to give mortgage to people, hence reducing significantly the number of those willing to take up houses.

“What some the developers are doing to stay a-float is to allow some kinds of installment payment but they cannot do much because of their capital. Until we’re able to solve the problem in the financial system by creating affordable mortgage that is when you will begin to see improvement in that area.

Ajayi also stressed that there is a misconception that solving a housing problem means bringing the cost of housing down so that someone can put hand in a pocket and buy houses.

According to him, it is not done like that anywhere in the world because the real estate asset is at the peak of asset class.

“Houses are expensive all over the world, the only thing is that you are not expected to pay at once, because we are constrained by the cash and carry mentality. If you are talking about very cheap house it will be substandard houses, but we are talking about a relative affordable homes and unlocking that is to provide a functional mortgage system, where young people can pay across 25 years.”

Also, the Managing Director of TobyKemsworth, Mr. Adekunle Raphael said the high cost of houses has led to a shift from purchase of home to landed property because they are more affordable.

He stressed that many real estate firms, like his company are now adopting installmental packages which now allow a petrol attendant between aged 20- 25 to access lands with a minimum of N20, 000 deposit monthly. They do more of land property and not homes.

According to him, it is affordable for young people to access land than homes, which will cost for between N12 million and N30 million.