The persistent macro challenges have negatively affected the country’s real estate sector, resulting in a slowdown in activities. Given the shocking inflation data released for February, the MPC resumed tightening by hiking its monetary policy rate (MPR) by 100 bps to 12.00%.
For the most part, banks would have passed on this increase to borrowers (real estate developers and mortgagors inclusive). The CBN governor, Godwin Emefiele, hinted at the weekend in Washington that the dire inflation report for March may well lead to another rate hike.
Fx sourcing challenges have put a strain on the sector as difficulties in securing imported building materials have led to higher costs in developing housing units.
Based on a recent survey carried out by a domestic financial advisory institution, the number of properties up for lease in Lagos was more than double the number put up for sale in March.
The latest national accounts from the NBS show that in 2015 GDP growth in the real estate sector slowed to 2.0% y/y from 5.1% recorded in 2014. As for construction, the sector grew by 4.3% y/y in 2015, compared with 13.0% y/y the previous year.
At the National Economic Retreat which took place in March, President Buhari reiterated the administration’s commitment to deliver one million housing units per year. This is no easy feat as only 250,000 units are currently delivered annually.
The minister of power, works and housing, Babatunde Fashola, disclosed recently that a new housing model designed to supply 17,760 flats across the country is underway.
Financing remains a major bottleneck as mortgages continue to account for a low single-digit percentage of banks’ loan books. Until this is adequately tackled, the housing deficit is set to remain substantial.