Friday, November 27, 2015 04:32PM / FBNQuest Research
Bridging the gap through mass housing:
Industry estimates suggest that about 100,000 new houses are built each year in Nigeria, compared to estimated demand of 700,000 units.
The deficit nationally stands at 17 million units and the estimated cost of bridging this gap is N59.5trn (US$300bn).
Punitive mortgage interest rates:
The absence of a vibrant mortgage market and the burden of high interest rates directly correlated with inflation are some key drivers of Nigeria’s housing deficit.
The average mortgage rate is currently over 20% although the emergence of the Nigeria Mortgage Refinance Company raises hopes of a reduction.
The latest report from the National Bureau of Statistics (NBS) shows headline inflation at 9.3% y/y in October.
CBN’s recent circular an addition to building costs:
Compared to many other countries, construction is expensive. The cost of building a three bedroom apartment runs up to US$50,000, compared with US$36,000 in South Africa and US$26,000 in India.
Following the CBN’s recent circular in June excluding certain imported items (such as building materials) from the official fx window, building costs are expected to rise even further.
Boost expected from the new budget, new minister:
Given the soft macro environment (weaker crude oil prices, twin devaluation of the naira), we have seen a slowdown in housing supply in view of the government’s lower revenue profile.
We are waiting for the 2016 budget but the signals are that it will be expansionary. The new minister, Babatunde Fashola, is likely to add considerable energy to the FGN’s housing programme.
Opportunities for investors
We see the start of monetary easing next year although its impact will be blunted by the “disconnect”.
We do not expect the CBN to maintain its recent policy of creating easy liquidity for long and see bond yields backing up above the 14.00% level in the weeks ahead.
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