These 5 Reasons Are Why Real Estate is So Expensive in Lagos
The cost of housing in Lagos has skyrocketed due to a multitude of factors, ranging from inflation in construction materials to rapid urbanization and regulatory hurdles. In this article, we uncover the top 5 drivers behind the steep housing prices in Lagos, that are causing difficulty in accessing affordable housing market in Nigeria’s busiest metropolis.
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1. Foreign Exchange Rate Fluctuations
Nigeria’s economy heavily relies on oil exports, leaving it vulnerable to fluctuations in foreign exchange rates. When the Naira depreciates against major currencies, the cost of importing building materials surges, pushing up housing costs. This volatile exchange rate compounds the affordability crisis, making it harder for ordinary citizens to afford homes.
2. High Interest Rates
Nigerian banks impose exorbitant interest rates on mortgage loans, exceeding 20% in many cases. These sky-high rates deter potential homeowners from seeking loans, shrinking the pool of buyers and artificially inflating housing prices. The unattainable interest rates further exacerbate the affordability gap, leaving many Nigerians locked out of homeownership.
3. Informal Economy and Lack of Mortgage Facilities
A significant portion of Nigeria’s economy operates informally, with many individuals lacking access to formal financial services like mortgages. The absence of widespread mortgage facilities limits homeownership opportunities, reducing demand and allowing property owners to maintain high prices. This perpetuates a cycle where homeownership remains out of reach for many.
4. Speculation and Investment
Lagos’s real estate market has become a hotbed for speculative investment, attracting both domestic and foreign investors seeking lucrative returns. This speculative frenzy drives up property prices as investors view homes as assets for capital appreciation rather than places to live. The emphasis on real estate as an investment vehicle distorts the market and exacerbates affordability challenges for ordinary citizens.
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5. Lack of Affordable Housing Policies
Despite government efforts like the Lagos Home Ownership Mortgage Scheme (Lagos HOMS), effective affordable housing policies remain elusive. These initiatives often fall short of addressing the overwhelming housing needs of the population, widening the affordability gap. Without comprehensive and sustainable housing policies, the dream of affordable housing for all remains distant.
In summary, the housing affordability crisis in Lagos stems from a complex interplay of economic, demographic, and regulatory factors. Addressing this issue requires a concerted effort involving government intervention, policy reform, and private sector engagement. By tackling the root causes of high housing costs and implementing effective housing strategies, Lagos can pave the way for a more inclusive and affordable housing market for its residents.