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Big City Housing Doesn’t Have to Be So Expensive

Bringing down prices requires a combination of affordable homes and upzoning.

The one-story house for sale on Oak Court in Menlo Park, Calif., is 88 years old and 830 square feet, with two bedrooms, one bathroom, a detached one-car garage, and no air conditioning. Almost anywhere else it would be the startiest of starter homes. But because it’s in Silicon Valley, where the supply of housing is far short of the demand, the bungalow was listed in mid-August for $1.575 million.

Imagine if ants put up barriers that stopped other ants in their colony from getting to a sugar cube. That’s what Americans are doing to one another by making housing impossibly expensive in the very places, such as Silicon Valley, that most need fresh talent.

Housing prices needn’t be high just because an area is hemmed in by water or mountains, as Silicon Valley is at the end of San Francisco Bay. After all, you can always build upward without wiping out green spaces and historical treasures. Rather, high housing prices are the outcome of a strategy by incumbent homeowners to keep a lid on construction. Keeping cities frozen in time, only more expensive, is great for homeowners and bad for just about everyone else, including local employers and the people who would come to work for them but can’t. While the problem is most pronounced in Silicon Valley, it exists in San Francisco, London, New York, Tel Aviv, Tokyo—name your global hot spot.

Affordability matters because cities have never been economically more important. Biotech companies choose to cram together in San Diego and Cambridge, Mass.; cybersecurity firms are cheek by jowl in Israel’s Silicon Wadi; consumer-electronics companies want to be near one another in the former fishing village of Shenzhen, China.

Constraints on housing prevent people from joining, and contributing to, clusters of innovation. A new paper by economists Chang-Tai Hsieh of the University of Chicago Booth School of Business and Enrico Moretti of the University of California at Berkeley found that restrictive zoning in Silicon Valley, San Francisco, and New York “lowered aggregate U.S. growth by 36 percent from 1964 to 2009.”

Thirty-six percent is kind of a big number. Says Hsieh: “If you compare it to all the things our political system talks about, this is just huge relative to everything else.”

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The good news is that cities don’t have to be prohibitively expensive. The trick is to form a broad coalition for what pro-housing activists call Yimby (yes in my backyard) by ensuring that the benefits will be enjoyed by all, or almost all. More housing can help wealthy landlords, who benefit from the right to put more housing units on a given block, as well as low- and moderate-income families, whose rents come down when the supply of rental housing goes up.

To be clear, not every city with a housing shortage is economically thriving. Delhi, Jakarta, Lagos, Manila, and other megacities have different issues to deal with, including an influx of desperate people from rural poverty. We’re talking about First World problems here: how to cope with the complications of prosperity.

One recent success story is Mountain View, Calif., the home of Google parent Alphabet Inc. In December the City Council approved a plan for the area around the Googleplex that allows for construction of almost 10,000 homes, up from zero in the original proposals. Leonard Siegel, who was vice mayor then and is mayor now, says the city is locating homes near office space rather than trying to jam them into older neighborhoods. “Many people are perfectly happy for us to build housing near Google, because it’s not in their backyard,” he says.

Mountain View officials insisted that developers make 15 percent of the homes affordable, and they’re charging them fees to cover the cost of new public infrastructure such as transportation and sewer lines. “The way I told one developer, ‘We’ll find out if we piled on too much,’ ” Siegel says. “ ‘I want to load your back with straw, and when it starts to break, pull one straw off.’ They said, ‘I understand.’ ”

Some market purists argue that building affordable housing is unnecessary. Filtering theory says that even the construction of luxury housing will ultimately benefit the poor because the rich will move into the new units, freeing up their old dwellings, which will be occupied by the middle class, who in turn will make their old homes available to the poor.

Filtering really is a thing, and it works in the aggregate. But in any given neighborhood, lower-income renters are right to fear that gentrification will price them out of their home. So they oppose new construction, which only exacerbates the citywide shortage. Case in point: A California Senate bill to allow for denser construction along transportation corridors, backed by the Yimby movement, failed earlier this year over concerns about displacement of the poor.

That’s why making sure everyone benefits is essential. Rent control is anathema to most economists, but if applied only to existing housing, not new units, it can tamp down political opposition to fresh development without discouraging construction. Another effective approach is inclusionary zoning, which guarantees that a certain share of development will be affordable. The trick is not to lay so many requirements on developers that they back out and nothing gets built; not every mayor can afford to be as demanding as Mountain View’s.

Finally, outright construction of public housing can make sense. Does that sound socialist? Consider that more than 80 percent of residents in Singapore, the free-market city-state, live in government-built housing. This year the World Bank praised the food courts in Singaporean housing, known as hawker centers, “where all income classes and ethnicities meet, socialize, play, and dine together.” At least two hawker centers, it said, have a Michelin star.

U.S. Department of Housing and Urban Development Secretary Ben Carson has one good idea: to use the lure of HUD dollars to get cities to ease zoning rules and permit more construction. But Carson hasn’t earned the support of advocates for low-income housing because he also wants to scale back an Obama-era rule requiring cities to work toward desegregation, which he once decried as “social engineering.”

Ydanis Rodriguez, 53, can identify with both sides of the Nimby struggle. He was born and raised in the Dominican Republic and moved as a teenager to Inwood, a neighborhood at the northern tip of Manhattan. He became a leader of 2011’s Occupy Wall Street movement. Now a New York City councilman, Rodriguez is a fierce advocate for his low-income constituents, many of whom are fellow Dominicans. When the city announced a plan to upzone Inwood, allowing for taller buildings and more market-rate housing, many of his constituents opposed it, fearing that gentrification would force them out. Rodriguez, controversially, came out in favor of the plan. He argued that it would keep low-income people in Inwood by constructing thousands of units of subsidized housing in addition to market-rate buildings.

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“It hurt,” Rodriguez says of the accusations that he was selling out his own people. But when the upzoning passed the City Council on Aug. 8, he says, “I went to sleep in peace that night.”

The upzoning of New York under a succession of mayors, including Michael Bloomberg (founder and majority owner of Bloomberg LP, which owns Bloomberg Businessweek) and Bill de Blasio, is evi­dence that a big city can burst the bonds that limit growth. For more evidence, see La Défense in Paris, Canary Wharf in London, Pudong in Shanghai. Growth can be messy, but it’s better than stasis, which pretty much assures that supercities will fall short of their potential. “Arguably,” Harvard economist Edward Glaeser wrote in a Brookings Institution paper last year, “land use controls have a more widespread impact on the lives of ordinary Americans than any other regulation.” The most important policy for cities is to let them grow.

Peter Coy

Where to find good value, high returns on real estate investment

Whatever the economic cycle, real estate sector remains an investment destination where investors will always get value and relatively high returns on investment, especially if the investment is done in the right place at the right price and for the right reason.

Bonds, treasury bills, equities, mutual funds, etc are all good investment asset class but cannot compare favourably with real estate in terms of reliability, flexibility of use and potential for value appreciation over time.

A good number of people think, erroneously, that real estate investment is for the ‘big boys’ but investment experts disagree,  stressing that investment in real estate takes into consideration the 5Ws consisting of who, what, when, where, why (and how).

As for who should invest in real estate, the experts say just “anybody” irrespective of age or gender can invest in real estate. Anybody, no matter how young, could investment and this includes women. At a real estate conference in Abuja recently, participants canvassed women empowerment to enable them invest in real estate, believing that it is one of the surest ways of protecting the future.

Bricks and mortar are more stable than stocks or bonds; they have long term growth with income return and this is why people should invest in real estate. The wide housing demand-supply gap offers   investment opportunity which value is well over $363billion. The deficit is said to be increasing by 2 million houses per year at the current population growth of 2.6 percent per year.

Though it is important to know that the time to invest is now, what matters most in all real estate investment considerations is where to invest and get not just great value, but also good returns.

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Good yield on any investment is very important because it compensates for the investor’s time, efforts and the sacrifice in terms of forgone alternatives to the investment. This is why where to invest and get good yield is critical.

A couple of years ago, the National Bureau of Statistics (NBS), noted that Lagos State recorded the highest amount of real estate activities at 37 percent  followed by Abuja at 22 percent and Rivers state at 6 percent,  covering 65 percent of all real estate activities in Nigeria.

That statistics has not changed, meaning that Lagos remains a compelling destination for real estate investment. This is quite understandable.  Lagos is Nigeria’s commercial nerve centre. It has over 20 million people, meaning that the city is a large real estate market. This island city has over three million housing deficit; about 80 percent of its population lives in rented accommodation which means that homeownership level is very low, thus presenting huge investment opportunity in residential real estate.

The Lagos real estate market is distinctively segmented into low, middle and high end. Demand is very weak at the low end market because this is where low income earners look for housing.  At the mid-end market, demand is relatively strong, but much stronger at the high end market.

Ikoyi, Victoria Island and Lekki, the three island locations in the state, constitute the core of high end submarkets in Lagos. Though property, land or built up, are very expensive in these locations, analysts say they offer real value and good returns to investors.

But to invest wisely and profitably in these locations, experts advise that in-depth analysis of each location’s strengths, weaknesses, opportunities and threats (SWOT) should be done.  First and foremost, potential investors have to understand that  “real estate investment is not a get- rich quick scheme;  understand your investment parameters;  be thorough in assessing opportunities; seek professional advice; do due diligence, and if the deal is not right, walk away”, Udo Okonjo, CEO, Fine and Country, advises.

As an investment destination, Ikoyi’s strength is in its excellent location,  ease of obtaining approvals for development,  high rents and return on investments (ROI) based on demand to be in a serene environment;  internationally recognized and accepted location increases value perception, and offers highest office rents in Nigeria and second highest in Africa.

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The weakness of this location is in its high cost of land and approvals, building would be restricted to high rise apartments to maximise land; there is need for an attractive design and layout of the project based on competing developments within the axis.

Opportunities in Ikoyi as an investment desitnation include ease of rental as there is a large pool of prospective home buyers, both local and  Nigerians in Diaspora would rather buy out right a finished product that meets their immediate needs in Ikoyi; amendment in Lagos planning legislation is expected to make zoning for commercial use easier.

But there are threats too. These come in as construction challenges leading to delayed delivery; lack of financing for projects or mortgages for prospective buyers; presence of competing developments within the same axis and planning challenges to secure permission for commercial office use.

The strengths of  Victoria Island are its excellent location, ease of obtaining approvals for development based on precedent, high rents and return on investments (ROI) based on demand, and a wide mix of support service companies.

The weaknesses include poor parking,  traffic congestion, lack of supporting infrastructure,  high cost of land and approvals, building would be restricted to high rise apartment to enable maximisation of land, and available land for residential development within this axis is extremely small

The opportunities in this location include lack of good quality residential and commercial space and demand for this is high; there is also opportunity for corporate entities and individuals to own properties close to their offices.

But the development of the Eko Atlantic in the long term is a major threat to the continued prosperity of Victoria Island. So, potential investors should always bear in mind that this development, which is already evolving with some residential and office developments coming up fast, may throw spanner in the works.


Builders worry over collapsed Jabi building, move against quacks

The Council of Registered Builders of Nigeria (CORBON) has expressed concern over the processes leading to the construction of buildings in the country.

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CORBON was reacting to the recent collapse of a three-storey building at Jabi in Abuja.

Chairman of the council, Prof. Kabir Bala, said the council was reaching out to relevant stakeholders in the building environment for synergy in enforcing laws to regulate products and processes which are inputs for the production of buildings.

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Bala, in a statement, said the council immediately after the incident “had meaningful discussions with the Standards Organisation of Nigeria (SON). The two bodies are working on a strategy that will engage all stakeholders in the sector to imbibe the culture of standards in all aspects and ramifications of construction projects.”

“CORBON shall continually build capacity of builders and work to checkmate the activities of quacks on building sites,” he assured.

Daniel Adugbo


Mortgage monitor survey detects fall in lending

Fewer mortgages in the United Kingdom are going to first time buyers but overall home purchase lending is continuing to grow, the latest mortgage monitor report shows.

According to, mortgage approvals increased by 1.5 per cent in July compared to June and were much higher than in both May and April, according to the report from e.surv chartered surveyors.

However, while in recent months first time buyers have been the main beneficiaries of overall market growth, they saw their share of the home lending market fall slightly.

Small deposit borrowers, mostly first time buyers, represented 22.1 per cent of the mortgage market in July, down on the 23.4 per cent recorded in June and the report warns that the effect of the recent Bank of England interest rate rise will be felt in future surveys.

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It explained that base rate increases, and the speculation which surrounds such decisions, often tempts existing home owners into the remortgage market. ‘Looking ahead to future months, the decision to increase the base rate to the highest level since February 2009 will be of interest across the market,’ said Richard Sexton, director at e.surv.

“Many homeowners will look to remortgage immediately while others are likely to take action in September when they receive their new, higher bills,” he added.

There was an increase in the proportion of new mortgages being given to large deposit borrowers, defined by this survey as having a deposit of 60% or more. This type of borrower made up 33.8 per cent of the overall mortgage market in June, up compared to the 32.9% recorded last month.

Meanwhile, mid-market borrowers saw their market share stay broadly the same month on month, representing 44.1 per cent of the total market compared to 43.7 per cent in June.

London continued to be dominated by buyers with large deposits, with more than 40 per cent of all new loans in the city going to this segment of the market during July. In the capital, 42.1 per cent of all loans were to those with a large deposit, higher than anywhere else in the UK.

Additionally, just 11.4 per cent of all mortgages in the capital went to those with small deposits, showing the difficulties first-time buyers have purchasing a property in the city. There was better news elsewhere in the country for young buyers. Of all the UK regions and nations, Northern Ireland saw the biggest percentage market share for small deposit borrowers, with 32.3 per cent of all loans going to this part of the market.

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Close behind was Yorkshire, where 32.1 per cent of all mortgage approvals were to borrowers with small deposits. The North West was the only region to see more loans go to those with small deposits than their large deposit counterparts at 30.9 per cent versus 25.5 per cent.

At the other end of the scale, London was the area with the lowest percentage of first-time buyers and others with small deposits. Other areas to post low percentage figures were the South East, which saw small deposit borrowers take a 16 per cent market share, and the South and South Wales, where this figure was 20.3 per cent.

“While many look at the UK property market as a whole, it really is better viewed as a series of local markets, often with wildly differing characteristics. The London market is once again dominated by those with large deposits or high levels of equity in their existing home, while the North West has more first time buyers and small deposit borrowers,” Sexton explained.


Building collapse: ARCON sets up project registration number system

Following the collapse of a building in the Jabi area of Abuja on August 17, the Architects Registration Council of Nigeria says it has set up a projects registration number system to mitigate such incidences.

The ARCON Projects Registration Number system is a mandatory registration number to be issued to all architects practising in Nigeria, for each of their projects, to certify that the projects are designed, handled and executed by Nigerian citizens fully registered to practise in Nigeria, according to the council.

The President, ARCON, Dipo Ajayi, explained that while the APRN was intended to combat the scourge of building failure and collapse through the elimination of quackery, it would also ensure that only fully registered and financially current architects and architectural firms would prepare, produce and submit designs for planning and implementation approval and receive such approvals when given.

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He said, “Architects and architectural firms who are registered with the council are to submit architectural building plans for approval/implementation and are responsible for the supervision of their designs.

“This measure is to complement the old practice of submitting building with a copy of the architect’s current practice licence, the affixing of ARCON stamps, signed by the architect and sealed with the architect’s ARCON seal on each sheet of the drawings submitted for approval; a letter from the client stating that the architect shall be responsible for the supervision of their architectural design during the construction period; the placement of the ARCON Project Registration Number on each sheet of the drawings submitted for approval and the placement of the APRN number, together with the architect’s or architectural firm’s name/registration number, on the project sign board upon commencement of construction.”

Ajayi said ARCON was also planning to have an enforcement and compliance unit which would ensure that only registered architects handle architectural projects in the country in consonance with the extant laws.

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“These measures put in place by the council are to complement the content and spirit of the National Building Codes which are to ensure that only professionals with the requisite knowledge and expertise of the building process are engaged to carry out building projects and are duly governed by the various Acts in our statute books,” he added.

While commiserating with the families affected by the collapse, Ajayi said the council was saddened by the unfortunate and shocking incidence that resulted in loss of lives, and commended the quick response of the emergency rescue team, led by the National Emergency Management Agency and the Federal Capital Territory Emergency Agency.

Maureen Ihua-Maduenyi

Enugu moves to provide affordable housing

Enugu State Housing Development Corporation (ESHDC) said it is poised to compete favourably with its contemporaries in the private sector of the Real Estate Sector, with a view to providing affordable housing to the public.

General Manager of the Corporation, Mr. Chukwuemelie Agu, disclosed this while commissioning an office outlet at the Departure Lounge of the Akanu Ibiam International Airport, Emene, Enugu.

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He stated that the agency would continue to serve the housing needs of the public, stressing that it was part of efforts to deepen its awareness drive of provision of affordable housing to the people of the state and beyond.

The manager added that it became imperative in order to reach target market using the airport as a platform given its appreciable traffic in and out of the state.

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We have trained our personnel who will man the office on basic communication skills and customer services to ensure that they treat prospective investors, who come here for inquiries, among others with utmost respect and humility. Management is determined to spread our dragnet, using other platforms to market our products and services in line with Governor Ifeanyi Ugwuanyi administrations effort to bridge the gap in the housing sector.

Lawrence Njoku


Housing, mortgage and informal sector growth potential

The informal sector of the Nigerian economy is, increasingly, becoming the toast of other sectors of the economy that is not doing well or not growing at expected pace. The housing  and  mortgage sectors  seem to be more inclined to leveraging the informal sector for growth.

The pension fund is also in this class. There is an on-going debate which argues that the inclusion of the informal sector with its estimated N81.048 trillion income to a new housing fund that could be created and added to the existing Pension Commission’s (PenCom) multi-fund structure can narrow down significantly the housing affordability gap.

But this has to happen alongside lowering of mortgage interest rate to single digit of 8- 9 percent, down from the current 22 – 25 percent commercial rate which operators charge on mortgage loans.

This argument flows on the assumption that the inclusion of the informal sector operators who constitute 67.54 million of Nigeria’s 81.15 million workforce in the contributory pension scheme will lead to increased housing affordability.

In the same vein, as economic activities continue to shrink leading to loss of jobs, salary cuts and significant drop in personal income, most of the primary mortgage banks (PMBs), which are struggling with hash operating environment and  rising non-performing loans (NPL), are looking to the informal sector to sustain their business and also stimulate growth in that sector.

Low capital base coupled with the prevailing economic conditions have so impacted the operations of these banks that a good number of them are unable to meet their contractual and statutory obligations to their clients and regulators respectively.

The Nigeria Deposit Insurance Commission (NDIC), one of the regulators of the sector, was quoted as saying that the inability of as many as 15 PMBs to pay their insurance premium as at December 2016 was an unfortunate situation that put the customers at risk.

“The loans and advances extended by these PMBs declined significantly by 31.87 percent to N168.96 billion in 2015”, the commission added, pointing out that 14 out of 42 PMBs failed to render returns to it while unpaid premium from nine PMBs amounted to N238.30 million the same year.

The Central Bank of Nigeria (CBN) says that notwithstanding PMBs’ improved performance in the past couple of years, their loans and advances, deposit liabilities and other liabilities decreased by 6.85 percent, 5.25 per cent and 5.89 per cent to N154.46 billion, N115.77 billion and N68.06 billion, respectively, at end-December 2016 from N165.83 billion, N122.18 billion and N72.32 billion at end-June 2015.

But the operators are not resting on their oars. They are building blocks and putting measures in place to engender growth of this fledgling sector in order to increase access and affordability, and by extension, enlarge the clan of homeowners in the country.

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Unbundling of mortgage origination process,  further reduction in loan origination period, introduction of computerised land titling registration,  land title insurance,  introduction of uniform underwriting standards (UUS) for informal sector, enactment of foreclosure law, and  wider public awareness for the sector are part of the push by the operators for the  growth of the sector.

Mortgage is a sub-sector of  the economy and the operators are saying that since the larger economy is not doing well and the mortgage sector is not insulated from what is happening in the larger economy, what is happening to them is not unexpected.

“We know what happened to oil price and the forex market. These have affected everything in the economy. In the case of oil, both the volume and the price went down. All these affected consumer purchasing power. Don’t forget that the balance sheet of the mortgage banks were not strong abnitio”, said, Ayodele Olowookere, CEO, Omoluabi Mortgage Bank Plc.

He stressed that the problems of the mortgage banks revolve around their small capital base and so there isn’t much they can do. “For all the money that I have, unless I raise additional capital, I don’t think I can do 1,000 mortgages. To do mortgages, you need long term funds and that is the only way you can do long term mortgages”, he said.

Udo Okonjo, vice chair/CEO, Fine and Country West Africa, agrees, emphasizing that the real core factor responsible for the slow growth in this sector is that the banks and the mortgage institutions don’t have long term funds; all they have are short term deposits. “The underlying fundamental for mortgage growth is that we have to have saving culture and large financial base because mortgages are long term funds. In an ideal world, you will be talking about 20-25 years mortgages at very low interest rate”, Okonjo added.

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Technically speaking, Nigeria has no mortgage system and Okonjo reasons that the country doesn’t really have a real estate sector. “What we are doing is just scratching the surface. If we really want to create wealth through real estate which is one of the major ways the developed world creates wealth, then we have to develop and grow the mortgage sector”, she emphasised.

But the operators are not deterred. “We are here to stay and grow this sector”, Olowookere assures, revealing, “at Omoluabi, we are looking at the best way to do things, especially in credit management and evaluation. We are looking at the informal sector.  People in this sector are not collecting salaries, but earn huge and regular income. So, we are finding creative ways of bringing them into the net. We are also looking at new ways to raise capital by bringing in more shareholders”.

Chuka Uroko

Affordable housing: private initiative to the rescue

With growing population, a lingering housing deficit and government’s continued inability to provide affordable housing in practical sense, a multinational has seized the initiative to provide technical support, materials, and connect  mortgage providers with prospective house owners, among  others. MUYIWA LUCAS reports that the initiative is part of the firm’s global plan, which will benefit 25 million households, with Nigeria benefitting substantially.

It is not a new piece of information that Nigeria’s population is increasing geometrically. But several studies conducted by the United Nations on Nigeria’s population showed that come 2050, there will be 400 million people in Nigeria, is frightening. This projection means that the country would have overtaken the United States (US) in another 32 years from now, as the 3rd most populous country in the world.

In similar vein, the World Bank projected that Nigeria’s population is growing at 2.8 per cent rate yearly, while her per urban population grows at 4.7 per cent as a result of the rise in rural-urban migration. This growth rate is, however, disproportional with staggered attempts at bridging the housing deficit by both the public and private sector in the country.

To experts and other stakeholders in the real estate and construction industry, these studies represent a timely warning for the country’s built environment, especially with regards to providing affordable housing in a country where a deficit of 17 million housing exists. This fear may not be unfounded given that population explosion comes with an attendant need for housing. Stakeholders and policy makers have put Nigeria’s financial requirement to tackle the deficit at N59.5 trillion.

A 2010 report commissioned by EFInA and Finmark Trust, titled: “Overview of Housing Finance Sector in Nigeria”, submitted that 85 per cent of the urban population live in rented accommodation, spending more than 40 per cent of their income on rent. Of these rented houses, 90 per cent are built through self financing by the owner, mainly due to lack of mortgage financing while less than five per cent of these houses have formal title registration.

The lack of an efficient and effective mortgage financing has remained a huge albatross on the country, irrespective of the various government efforts in this direction. This is why only a tenth of the one million homes built yearly, has helped to tackle the deficit over a period of 10 years. Most of these, findings revealed, are by persons who contend with deficient financing, shoddy workmanship and poor building materials, among others.

The low income category seem to be the most hit in Nigeria’s housing debacle. For a Nigerian aspiring to build an affordable home with about N3 million, there are enough challenges to induce headaches, which either frustrate the ambition or force the project to be abandoned. These include access to finance, which is the major source of worry; others are delays in project completion, taking between two to five years; lack of access to qualified building professionals without cut-throat charges as professional fee; mortgages focusing on the high end market; inconsistent quality of building materials; bureaucratic building approval process and the high cost of acquiring land and its tenure issues.

A former Minister of Lands, Housing and Urban Development, Mrs. Akon Eyakenyi, acknowledged that affordable housing delivery for the low and middle income earners cannot be achieved without the provision of incentives to encourage private sector participation.

“To build a house in Nigeria is a very expensive task due to the high cost of building materials. Affordable housing cannot, therefore, be achieved without a drastic reduction in the cost of housing construction and other associated costs, which invariably determine the selling price. Consequently, for affordability to thrive, emphasis must shift to reducing the cost of housing construction to promote access to affordable homes to the vulnerable segment of our national population,” Mrs Eyakenyihad said at a pre-summit meeting on the Nigeria housing and construction summit/expo, in 2014.

She then called on the organised private sector, manufacturing outfits, finance houses and multilateral agencies to support the drive for affordable housing delivery.

Eyakenyi’s call has not fallen on deaf ears, as the private sector has taken up the challenge of housing in the country. This has again made for a silver lining to appear on the horizon for Nigerians desirous of owning their affordable houses.

For instance, Lafarge Africa has put in place an initiative, which it calls “Easy Home”, an innovative affordable housing initiative, which is already providing innovative solutions for the construction, renovation and extension of houses. The scheme is tailored to the local challenges and needs of individual home builders, including Nigerians, who already own their land and want to build. Through the initiative, LafargeHolcim Group, hopes to impact about 25 million people by 2020 and Nigeria is expected to benefit from a significant chunk of the scheme.

Lafarge Africa Head of Affordable Housing initiative, Mr. Aurelien Boyer, explained that if the associated challenges to affordable house ownership are addressed, Nigerians could build more houses faster. This, he said, was what the firm set out to do with the Easy Home scheme. “The whole idea is to provide individuals with free technical expertise and demystify the idea of owning a home. Lafarge Africa provides free cost estimate i.e. Bill of Quantity and designs for prospective builders. We also connect them with sources of finance as well as artisans that will build at the least possible cost without compromising quality,” Boyer explained.

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The Easy Home initiative, which began three years ago, has impacted positively on over 30,000 persons across 14 states of Lagos, Ogun, Oyo, Kwara, Ondo, Benin, Osun, Nasarawa, Niger, Cross River, Abia, Akwa Ibom, Rivers and Abuja. Beneficiaries of the scheme include Business people, civil servants and salary earners, who have used “Easy Home’s” menu of free services to build bungalows, duplexes, self-contained apartments, shops, schools, clinics etc.

“The demand for housing outstrips supply in the low-income segment where most live in rented houses. Presently, 5,000 households in mainly urban and peri-urban households earning N20,000 to N300,000 monthly have keyed into the Easy Home scheme. We, as Lafarge, estimates that nine million households can afford to build their property incrementally. Through Easy Home, Lafarge Africa is contributing to the reduction of the national housing deficit and helping to accommodate a large chunk of Nigeria’s population,” Boyer explained.

A consultant architect with a leading construction firm, Mr. Richard Ibilola, has praised the initiative. Easy Home, he said, will have a very significant and positive impact on the spread of good construction practices and the deepen building and construction supervision skills in Nigeria. For him, EasyHome will make it easier for Nigerians to step on the home acquisition ladder because it is designed to take significant initial costs burden away from house owners, and at the same time boosts the development of skills in the ecosystem.

A financial analyst with vast experience in mortgage matters, Mr. Kayode Oyedele, who explained that given the format of the initiative and having had a first hand experience of the scheme as a financial advisor to some beneficiaries, praised the initiators of the scheme. According to him, it is a delight that the Easy Home scheme is changing the perception of mortgage financing and affordable housing schemes in the country.

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“This should be encouraged. More programmes like this will happen in Nigeria only when there’s a mortgage system, which allows for the repayment of loans to acquire houses spread over 15-25 years. Such will give developers and banks an incentive to develop massive residential projects. Regulators will also find it much easier to monitor and punish builders responsible for defects,”Oyedele said.

To many of its beneficiaries, Easy Home is a huge relief. A pharmacist, Mrs.Ejiro Foyinbo, extolled the concept. She said the provision of free technical assistance, links to trusted builders, reliable retailers and qualified artisans, which the scheme afforded her, has helped to maximise her budget.

But this is not Lafarge Africa’sfirst intervention in affordable housing programmes. The firm, in collaboration with the French Development Agency (AFD) and LAPO microfinance, have long invested N1.3 billion to provide affordable housing in the country under its “Ile Irorun” affordable housing initiative, which started in October 2013. It was the firm’s first operation launched in the frame of AFD and Lafarge partnership to improve housing conditions through microfinance in Africa.

The “Ile Irorun”, was intended to enable low-income families to finance the construction, extension or the renovation of their houses and thereby help them improve their living conditions. In all, an estimated 3,500 Nigerians are expected to have benefitted from the programme by end of this year.

In 2015, Lafarge Holcim also unveiled a self-contained studio-flat at its Oregun, Ikeja, Lagos office, as a model for affordable housing for the low and middle income earners. The feat served as the bedrock for the firm’s planned delivery of a 500-unit of low cost housing in Gwagwalada, Abuja. The types being provided in this scheme include two and three-bedroom flats and studio types. Its prices range from N1.5million for studio model, while others are between N4million and N6million.

Stakeholders are convinced that the initiative is capable of bringing succour to the numerous Nigerians, who are daily losing hope of owning houses.


Steady interest rates bring mortgage volume back to life

Mortgage borrowers came back to the table last week to refinance and to purchase homes, after their numbers fell for most of the past month.

Total mortgage application volume rose 4.2 percent last week, according to the Mortgage Bankers Association’s seasonally adjusted report. Volume was still 15 percent lower compared with the same week one year ago.

The gains may be thanks to less volatility in the mortgage market, after wide swings at the start of August. The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($453,100 or less) remained unchanged at 4.81 percent last week, with points decreasing to 0.42 from 0.43 (including the origination fee) for loans with 20 percent downpayments.

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The average rate for jumbo loans, however, did decrease slightly. That may have spurred more refinance activity, as borrowers with larger loans have more to gain from even small drops in rates. Mortgage applications to refinance a home loan increased 6 percent for the week but were still 33 percent lower than a year ago, when interest rates were considerably lower.

The refinance share of mortgage activity increased to 38.7 percent of total applications from 37.6 percent the previous week. The adjustable-rate mortgage (ARM) share of activity increased to 6.5 percent of total applications. Homebuyers tend to favor ARMs when prices are high, because they offer lower interest rates and can be at a fixed rate for up to a decade.

Mortgage applications to purchase a home, which are less rate-sensitive week to week, rose 3 percent from the previous week and were barely 1 percent higher than a year ago. Buyers today are still facing a critical shortage of homes for sale and continued price gains. Home sales, however are strongest on the higher end of the market, so the drop in jumbo loan rates may have helped some buyers get off the fence and into a home.

Purchase application volume is currently below its 2018 average “due to persistent problems of affordability and low inventory,” said Joel Kan, an MBA economist.

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Mortgage rates have not moved at all this week either, making this Tuesday the eighth straight business day with no change.

“During that time, underlying bond markets have improved slightly,” said Matthew Graham, chief operating officer at Mortgage News Daily. “Normally, those improvements would translate to modest improvements in rates, but lenders are waiting for a bigger breakout that, thus far, has failed to materialize.”

Diana Olick



How real estate can impact population explosion

Nigeria is one of the most populated countries in the world. Its population density has always had far reaching effect on its demands for real estate. In reality, population density is an economic advantage to most countries. However, the reverse is the case in Nigeria where the population has become a disadvantage considering the acute shortage of almost everything including the endowment of nature like oil and space.

While considering that Nigeria has the manpower, the technical and technological know-how and resilience to endure harsh weather, the country is lagging behind far more compared to its other peers in the comity of nations. The resultant effect is the impact of policies, implementation, enforcement and supervision that made the ease of doing business a Herculean task. To worsen the situation in the country just recovering from recession, real estate market ought to grow because good investors see recession as the veritable opportunity to invest, especially in real estate. But that was not the case even though the population of the country will support that venture.

Demographics are the data that describe the composition of a population, such as age, race, gender, income, migration patterns and population growth. These statistics are an often overlooked but significant factor that affects how real estate is priced and what types of properties are in demand. Major shifts in the demographics of a nation can have a large impact on real estate trends for several decades. For example, all the children born between 1945 and 1964 are an example of a demographic trend with the potential to significantly influence the real estate market.

The transition of these children to retirement is one of the more interesting generational trends in the last century, and the retirement of these children, which began back in 2010, is bound to be noticed in the market for decades to come. There are numerous ways this type of demographic shift can affect the real estate market, but for an investor, some key questions to ask might be: How would this affect the demand for second homes in popular vacation areas as more people start to retire? Or, how would this affect the demand for larger homes if incomes are smaller and the children have all moved out? These and other questions can help investors narrow down the type and location of potentially desirable real estate investments long before the trend has started.

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In the aftermath of the extreme boom and bust of the American real estate market over the past 15 years, research partners set out to explain movement in house prices at the state level in the United States (US) using fundamentals or market drivers other than forces like speculation. More specifically, they focus on explaining house price appreciation using one key fundamental variable, which is population growth. The earth is becoming much more populated, creating more demands for assets. Literature put forward in the past focuses on demographics and consumption, but not so much on real estate finance. Meanwhile, real estate assets constitute 54 per cent of the world’s wealth.

Demographics are a particularly useful angle of study for explaining house price appreciation because of the simplicity of the concept. So as the demographics angle is so logical, it really illustrates the basic economic equation that entails higher demand in combination with a limited or inelastic supply that equals higher prices. In that way, it is a simple story.

In 2017, Venture investors deployed over $5 billion in real estate technology, more than 150 times the $33 million invested in 2010. Once a sector seemingly ignored by the Venture industry, real estate technology has come front and centre, notably producing two of the three most valuable startups in US; the WeWork and Airbnb. This, in a way, is as a result of population explosion that attracts investments.

Driving this investment explosion is the evolution of real estate technology from its initial phase of software and market places complementing the incumbents to a new era where technology-enabled players are going head to head against the sector’s largest incumbents (hotels, commercial landlords, brokerages) and consuming massive amounts of investor capital as they scale. As challengers mature into leading players, we believe we are entering a third phase in the evolution of real estate technology.

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The businesses that define the emerging third phase of real estate technology are likely to look more like the earliest technology businesses in the space – more complementary than competitive to incumbents and deriving their value proposition by utilising new technological capabilities. This phase, likely, will include companies that leverage sensors and virtual reality to create smarter spaces, machine learning to standardise and draw insights from industry data and platforms to more efficiently manage transaction services as well as to design, manage and outfit physical spaces.cap.gif


cap.gifReal estate represents a significant portion of most people’s wealth, and this is especially true for many homeowners in US. According to the most recent Survey of Consumer Finances by the Federal Reserve, 65.2 percent of American families owns their own primary residence. The size and scale of the real estate market make it an attractive and lucrative sector for many investors. Given that US real estate is a $35 trillion asset class, and represents a multifaceted market generating over $1 trillion in revenue annually, according to IBISWorld Industry Reports, the strong interest in companies built to serve, arbitrage or compete with the incumbents is not surprising. Nevertheless, up until a few years ago there were only a handful of significant US real estate technological success stories.

During the beginning of the 1960’s, the People’s Republic of China had a growing population of 600 million people. In the aftermath of a famine and the Cultural Revolution, the growing Chinese population was becoming a major issue. The government felt that the economy was not able to support the massive population, and thus began the propaganda campaign to encourage the use of contraception. It was not until 1979, when China created and enacted the One Child Policy, which included government forced abortions and sterilisations, which successfully prevented millions of births.

Now, 30 years later, the effect of the One Child Policy has successfully limited the population growth and created a rising economy. The new concern that stands is that as the Chinese workers age and head to retirement, many cities will experience an outflow of population as well as declines in output of production. With the demographics of the labour supply rapidly aging, the economy will likely have lower production output levels. This raises the questions of how it would affect the economy and housing prices.

Maduka Nweke

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