The ailing economic conditions in Nigeria are casting a shadow over various sectors, with the real estate market and its supply chains bearing the brunt of the impact in the first quarter of 2024. The escalating foreign exchange rate, reaching N1450/$, has triggered a ripple effect, adversely affecting the real estate sector’s supply chain and prompting renegotiations in contractual agreements due to surging prices of reinforcements.
Renters, including individuals, households, and businesses, are grappling with uncertainty as they face the burden of price hikes in the real estate market. The situation has been exacerbated for tenants living in city suburbs, where rent has surged by over 50% in the past year.
The combined impact of factors such as exchange rate fluctuations, rampant inflation, volatile currency values, naira devaluation, and the removal of petrol subsidy has caused commodity prices, including building materials, to soar. This surge, particularly in cement prices, has led to a significant reduction in construction activities, exceeding 50%.
Disposable income has dwindled considerably, and building materials, especially cement and reinforcement rods, have seen a staggering 70% increase in prices. This economic turbulence has prompted extensive discussions in commercial offices, warehouses, short-term rental spaces, hospitality, and service apartments, leading to weak market transactions and volatility in the FX market.
The prices of reinforcement rods have experienced substantial hikes, with significant increases across various dimensions. For instance, the 8mm rod has risen from N255,000 to N518,000 per tonne, while the 10mm rod has surged from N442,000 to N520,000. Paint, another critical building component, has also witnessed a surge in prices.
Emmanuel Oyelowo, former Redan Auditor, Southwest, expressed concern about the impact of the current economic challenges on rent defaults, emphasizing the need for landlords to innovate amid the market slowdown.
Frederick Okpaje, Managing Director of PWAN Group, highlighted the plight of tenants, noting that rents are escalating almost monthly. He pointed out that new housing units are not entering the market as expected, enabling landlords to capitalize on the situation and increase rents significantly.
Tenant experiences mirror the challenging conditions, with rent hikes becoming a frequent occurrence. Economic Consultant and CEO of the Centre for the Promotion of Private Enterprise, Dr. Muda Yusuf, urged the Central Bank of Nigeria (CBN) to address inflation and implement proper regulations in key sectors. He proposed reforms in the foreign exchange market, addressing forex liquidity issues, reducing import duties on intermediate products, and tackling high transportation and logistics costs to restore normalcy and reduce transaction costs at the nation’s ports.