The reverberations of the global housing crisis have been felt profoundly by both developers and buyers, reshaping the dynamics of property acquisition and ownership on a global scale. The surge in rental demand, especially in key urban centers like Toronto, various UK and European locations, and the US, has cast a shadow over the middle class, posing a significant threat.
In Canada, the rising cost of living has triggered a notable migration of young adults aged25-35 from Toronto, Ontario to more affordable provinces such as Alberta, Saskatchewan, and New Brunswick. The average price of a one-bedroom apartment in Toronto has astonishingly reached $2,420, with Ottawa at $1,840 and Windsor at $1,350. Similarly, cities like Birmingham and London have witnessed a striking increase in rental costs. For instance, a two-bedroom apartment along Coventry Road in Birmingham was priced at £825per month in 2022. By August 2023, the cost had surged to £925 monthly, showcasing a substantial 12.12% price hike.
This crisis doesn't solely impact developed nations; its repercussions extend to less developed countries as well. Escalating land prices in Lagos, neighboring towns, and Abuja lie at the core of the problem, resulting in an unprecedented decline in home affordability.
For individuals with middle to low incomes, the aspiration of property ownership has become increasingly elusive due to the steep rise in building material costs. In contrast to the past in Nigeria, where around 40% of individuals born in the 1960s and early 1970s managed to buy their first homes by ages 30-35, this figure has significantly dwindled. Average families now grapple with the challenge of saving for longer periods to accumulate the necessary down payment, typically ranging between 10% and 40% depending on the property type.
Between January and July 2023, the global housing crisis triggered an extraordinary shift in property acquisition and ownership. Prices surged by over 70%, evident in the costs of newly constructed homes, coupled with notable delays in project completion timelines. Developers in major cities like Lagos and Abuja are struggling to maintain profitability as escalating building material costs turn the delivery of affordable housing into an uphill battle for Nigerians.
The removal of the petroleum subsidy has caused construction costs to skyrocket, worsening the existing housing deficit. Consequently, this situation would negatively impact purchasing power, making homes less affordable for potential buyers.
The residential market in Lagos has experienced a noticeable increase in rental rates across all home categories. Homeowners and landlords have implemented rent hikes ranging from10% to as high as 67%. For instance, a one-bedroom apartment in Ikate Elegushi was priced at an average of N1.2 million in 2022. The current average stands at N1.8 million or higher, depending on the property type.
Residential property prices have also surged by over 40%. The average price for a two-bedroom apartment in Ikate Elegushi was 40 million Naira in 2022. Currently, a two-bedroom apartment costs upward of N50 million. Similarly, in Lekki Phase One, a three-bedroom apartment cost an average of N90 million in 2022, but now stands around N120million as of August 2023.
For Nigerian investors in the diaspora, this juncture presents a compelling opportunity to engage in real estate investments due to the ongoing devaluation of the naira and the volatility of the foreign exchange market, with $1 now equaling N950. This translates to receiving fewer dollars for more naira. In theory, a two-bedroom apartment on Orchid Road in the Lekki axis of Lagos was previously priced at N45,000,000, equivalent to $97,826 at the previous exchange rate of$1/N460. However, due to the current market rate of $1/N950, the purchase price is effectively reduced to $47,368.
For individuals residing in Nigeria, it could be wise to consider alternative real estate choices. Such options encompass Fractional Home Purchase, Group Home Purchase, and Long-Term Leases, presenting more economical avenues, given the prohibitive expenses of conventional home acquisitions. Furthermore, there are alternatives like portable cabin homes – which are compact and prefabricated structures that can be easily relocated and installed in various settings. Addressing the crisis necessitates governmental intervention in the form of price control mechanisms and developer subsidies. Moreover, implementing tax exemptions and incentives could provide relief and stimulate the housing market's recovery while also revitalizing neglected properties and housing projects.
In conclusion, the global housing crisis has triggered a complex interplay of challenges, impacting individuals, developers, and economies on a worldwide scale. As governments grapple with the imperative to strike a balance between market forces and affordable housing, innovative solutions must be sought. By embracing targeted interventions such as price controls, developer incentives, and tax policies, societies can hope to alleviate the strain on housing affordability. It is through concerted efforts and adaptive policies that the path toward sustainable housing solutions can be paved, ensuring the aspirations of homeownership remain within reach for diverse populations across the globe.
