While it is true that house prices are so high because demand and supply forces, inflation caused by the hundreds of billions of funds that banks released into circulation in the years before the financial crisis remains a real problem. Property prices rise much faster than wages, making them become less and less affordable. Anyone who didn’t already own a house before the bubble started growing ends up giving up more and more of their salary simply to pay for a place to live. And it’s not just house buyers who are affected; pretty soon, rents will go up too, including spaces in social housing subsector.
This increase in prices often leads to massive increase in the amount of money that first time buyers spend on mortgage repayments. For example, in USA, while in 1996 the amount of take home salary that a first time buyer would spend on their mortgage was 17.5 per cent, by 2008 this had risen to 49.3 per cent. In London, the figures are even more shocking, rising from 22.2 per cent of take home pay spent on their mortgage in 1997 to 66.6 per cent in 2008.
One of the continuing challenges posed by unprecedented urbanisation in developing countries is the provision of adequate housing. Over the last three decades, Nigeria, like several developing countries, has emphasised public housing schemes, but with little success. This coincides with global paradigm shift from direct public provision of housing to the enablement of private shelter initiatives and housing production. Private housing development features and dynamics and the factors affecting the sector in the country ought to be governments’ focus if the mouthing policies of providing shelter for citizens is anything to go by. This makes it an urgent need for the creation of an enabling environment, including support of housing initiatives and investments by householders, small-scale providers, and entrepreneurial private firms.
The implications of enabling strategy for housing finance, access to land, residential infrastructure, institutional regulations and building materials and related industry, particularly in the light of the need for the private sector to play greater roles in housing, should not be neglected. It draws from aspects of empirical study by various authorities and professionals who review government housing policy-related issues.
In Nigeria, for instance, former Managing Director of the Nigeria Mortgage Refinance Company (NMRF), Prof. Charles Inyangete, disclosed that to forestall a housing crisis in the country in the next couple of years, Nigeria would require N3.65 trillion to increase housing stock by 730,000 units annually.
Speaking at a facility management forum in Abuja to mark the World Facility Management Day, Inyangete said the country currently has a housing deficit of 21 million units, just to be on the safe side, adding that going by the current growth rate in Nigeria, there would be a significant housing deficit in the coming years, unless efforts are geared towards addressing the gap.
Asset price bubbles and the speculative behaviour associated with them tend to cause financial crises, which lead to slower growth, higher unemployment and higher government debt. High house prices also act as a mechanism for transferring wealth from the young to the old, from the poor to the rich, and from those that don’t own their own homes to those that do. Even those with housing don’t benefit massively from higher house prices, after all, we all need somewhere to live, and anyone selling their home will find that on average other house prices will have risen by the same amount, leaving them no better off. In reality, only the banks and those with many properties benefit from high house prices.
High prices mean that people will have to take out larger mortgages for longer periods of time, which means more money in interest payments for the banks. The highest point of that being the fact that government charges series of taxes that swell the already bloated house price. This does not help matters because those who cannot afford to own their homes have their problems even compounded with various charges imposed on various property.
For government to be serious in providing accommodation for the teeming population, taxes and charges relating to land, importation of building materials not produced in Nigeria and all other certificates documentation that cost money to obtain should be made tax free, at least, for now. Those who labour to extract and manufacture building materials locally should be encouraged and given some facilities to ease their production.
Nigeria is perhaps the fastest urbanising country in the African continent. One of the most important challenges facing the country is the provision of affordable housing. As more and more Nigerians make towns and cities their homes, the resulting social, economic, environmental and political challenges need to be urgently addressed. A recent study of housing situation in Nigeria put existing housing stock at 23 per 1000 inhabitants. Housing deficit as at 2007 (Mabogunje, 2007) is put at 15 million houses, while N12 trillion will be required to finance the deficits. This was about four times the annual national budget of Nigeria as at the period under review (FHA, 2007).
House prices and rents, on the other hand, have grown ahead of general inflation. Making matters worse, the composition of houses for sale and rent on the market has been inexorably shifting towards very expensive house (Nubi, 2008).
Between 1975 and 1980, there were plans to deliver 202,000 housing units to the public but only 28,500 units, representing 14.1 per cent was achieved.
Also, out of 200,000 housing units planned to be delivered between 1981 and 1985, only 47,200 that equals 23.6 per cent was constructed. Under the National Housing Fund (NHF) programme initiated in 1994 to produce 121,000 housing units, it was believed that less than 5 per cent was achieved. Despite series of government policies towards housing delivery, there exists a gap between housing supply and demand.
Research has shown that 75 per cent of urban housing is situated in slum conditions, and the quality of the housing is poor and clearly an affront to human dignity. As part of efforts to increase qualitative, affordable housing for the masses in the country, the Federal Government in 2004, pledged to adequately fund research pertaining to the manufacture and the use of local materials in the sector.
Housing delivery in Nigeria is provided by either the government or private sector, but despite Federal Government’s access to factors that accelerate housing production, the country could at best expect 4.2 per cent of the annual requirement. Substantial contribution is expected from other public and private sectors.
The production of housing in Nigeria is primarily the function of the private market; approximately 90 per cent of urban housing is produced by private developers.
Due to housing demand created by rural-urban migration, which account for 65 per cent of urban population growth, the fixed supply of urban land and inflation of rental and housing ownership cost (Taylor, 2000).