Impact of higher interest rates on mortgages in Nigeria
Analysts say the elevated interest rate environment in Nigeria is impacting the adoption of mortgages in the country and reducing access to affordable housing. How can this be addressed? Adeniyi Akinlusi, a Director at Greenstem Group, joins CNBC Africa for this discussion.
Mon, 27 May 2024 14:30:46 GMT
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AI Generated Summary
- Elevated interest rates are negatively impacting both the supply and demand sides of Nigeria's housing market, leading to increased costs for developers and hindering access to affordable mortgages for buyers.
- Accurate data collection is essential to understanding the housing market's needs and addressing the significant housing deficit in Nigeria, estimated to be over 22 million units.
- Government initiatives, such as the National Housing Fund and the Family Homes Fund, are supporting first-time homebuyers with lower interest rates, but wider market concerns persist due to the elevated mortgage rates.
- The potential for further rate hikes by the Central Bank of Nigeria to combat inflation poses challenges for the industry, emphasizing the importance of promoting rental housing alongside homeownership for long-term sustainability.
The real estate and construction sector in Nigeria, a major contributor to the country's economic growth, is facing significant challenges due to elevated interest rates. Adeniyi Akinlusi, a Director at Greenstem Group, highlighted the adverse effects of the current interest rate environment on both the supply and demand sides of the housing market during a recent interview on CNBC Africa. With the Central Bank of Nigeria (CBN) increasing its Monetary Policy Rate (NPR) to combat inflation, the cost of building materials and property prices has surged, making it difficult for developers to maintain profitability. Akinlusi emphasized that the high mortgage rates, averaging between 18% to 20%, are hindering access to affordable housing for prospective buyers, as these rates exceed the ideal single-digit figures. He noted that while government initiatives such as the National Housing Fund and the Family Homes Fund are providing support to first-time homebuyers with lower interest rates, the broader market is still feeling the impact of the interest rate hike. Akinlusi acknowledged the importance of accurate data collection in assessing the housing market's needs and addressing the significant housing deficit in Nigeria, estimated at over 22 million units. He highlighted the progress in data collection by various organizations but called for a centralized data center to streamline planning efforts. Looking ahead, Akinlusi expressed concerns about the potential for further rate hikes by the CBN to curb inflation, which could pose challenges for the industry. To mitigate the impact of rising interest rates on mortgage affordability, Akinlusi suggested the expedited launch of the Nigerian Mortgage Guarantee Company to reduce down payment requirements and emphasized the importance of promoting rental housing as a sustainable solution alongside homeownership. While government-led housing projects aim to provide some relief, Akinlusi stressed the need for private sector investments in the rental housing market to ensure long-term sustainability.
