Rising cost of outright purchases sees Nigeria mortgaged households growing 287% to 38.9m in 2030

The number of households requiring mortgages to finance home ownership in Nigeria is seen growing by 287 percent in 2030 to about 38.9 million, according to Euromonitor International in a report titled, ‘The Future Consumer Households in 2030’.

The growth in the number of mortgaged households, according to the report, is due largely to rising costs, which constrain intending homeowners from outright buying or building. It is also as a result of urbanization and rapid growth in population.

Euromonitor indicates that expanding cities are driving rental markets, as a large number of newly urbanised citizens cannot afford to purchase a home outright.

The report ranks Nigeria fifth in global largest markets by mortgaged households by 2030, coming after India, China, Brazil and Indonesia.

“Urbanisation will drive demand for home finance, as mortgage markets mature and banks provide more attractive rates to home buyers,” it said, adding that world’s largest mortgage markets, led by India, will see surging growth rates in mortgaged households at the expense of dwellings owned without a mortgage.

It also states that apartments are becoming more popular as dwellings as they provide a solution for housing large numbers of people in a limited urban space, and can be smaller and therefore cheaper with easier access to utilities and digital services.

It added that the onset of urbanisation is creating a boom in apartments with countries such as China, Brazil, the UK, and Nigeria seeing surging growth in apartments through to 2030.”

The report specifically sees rising urban property values decreasing the number of potential owners, adding that swelling cities create housing shortages and apartments, which drive up population density and noise/waste pollution.

According to analysts, despite the business opportunities therein for mortgage finance companies, the challenge of high-interest rates may exclude the expected number from taking mortgages, thereby increasing the over 17 million housing shortage.

The Mortgage Banking Association of Nigeria (MBAN) has revealed that the size of the mortgage market is growing steadily from N284 billion in 2010 to N518.76 billion in 2016. Growth, however, has been slow due to high-interest rates and operational bureaucracy such as the cost of title transfer.

Most analysts have therefore called for a gradual reduction in interest rate in the economy from current monetary policy rate (MPR) of 14 per annum to a maximum of 6 per annum and removal of operational bureaucracy such as the reduction in the cost of title transfer to a maximum of 1 per cent of property value.

According to the Centre for Affordable Housing Finance (CAHF), the lowest recorded interest rate on a mortgage in Nigeria is 19 percent, as of September 2016, and requires at least a 25 percent down payment., adding that the average mortgage size is US$ 18 000, while the cheapest newly built house by a developer recorded by CAHF is US$ 10 000.