Recession: Developers set to raise property prices
With the current economic situation and the attendant rise in the prices of building products, the cost of properties may increase anytime from now, developers have said.
According to findings by our correspondent, developers may increase the prices of properties put up for sale by between five per cent and 10 per cent.
The prices of building materials, including iron rods, sanitary wares, tiles, roofing sheets and quarry products have in the last few months risen, with cement, a major building material, rising by 44 per cent to 50 per cent in the last one month.
Properties on the outskirts of Lagos, the commercial nerve centre and the country’s property market hub, currently sell at N7m for a one-bedroom flat; N12m for two-bedroom flat; and N13.5m for three-bedroom flat, on the average.
In the more urbanised areas such as Lekki, properties are going for as high as N40m for a three-bedroom apartment and N50m upwards for duplexes and detached houses.
Most developers, according to findings, are keeping the prices low for now as the market remains slow.
“But going forward, it will no longer be sustainable if prices of building construction products such as cement are not adjusted. We cannot sell below our cost prices,” the National General Secretary, Real Estate Developers Association of Nigeria, Mr. Akintoye Adeoye, said.
He added that with the percentage increase of cement as well other imported building components, which had also risen due to foreign exchange scarcity, developers would be compelled to increase the prices of their products soon.
He said, “Cement is a major component in construction, and with the rate of increase in price, there is no way it won’t affect the cost of production, and definitely the cost of production will be paid by the consumer. Developers have to sell to make profits and can’t sell below the cost price.
“I recently bought a bag of cement for N2,500, the same product I bought for N1,600 a month ago; that is N900 difference. Someone has to pay for that. The cost of a building will depend on the overall cost of production, but we may consider increasing our selling prices by between five and 10 per cent.”
Adeoye said developers were, however, considering a reasonable percentage due to the fall in the purchasing power of Nigerians as well as rising inflation.
The Chief Executive Officer, Top Services Limited and immediate past President, African Union of Architects, Chief Tokunbo Omisore, said the cost of labour had been reviewed upward and most developers were at a loss on how to make returns on their investments.
He said, “Once cement and other building materials go up in price, labour automatically goes up. A labourer who carries cement bags cannot do so knowing that one bag is in excess of N2,500 and then accept to be paid N1,000 per day. When he lifts like 10 bags of 50kg each, that is N25,000; he must earn at least 10 per cent of that per day which is N2,500. The bricklayer will not want to be left out, he is the skilled labourer.
“Of course, there is no money to support that. So, labourers will not do a good job, they may not do much or may be disgruntled over payment. So, rather than do 100 blocks a day, which is the norm, he will want to spend more days so that he will earn more. The developer. on the other hand, will be in a hurry to finish his construction because the naira is falling daily. The sector is in a crisis.”
Omisore, who is also a retail mall developer, said that the current price regime of building materials had become a yardstick for every other price to be reviewed upward.
The Chief Executive Officer, Propertygate Development and Investment Plc, Mr. Adetokunbo Ajayi, said developers who were currently involved in construction were struggling to recoup their investments.
He explained, “Development is basically an assemblage of input whether you are coming up with residential, office or retail development; if the prices of those inputs begin to go up, no matter how much a developer desires to be fair, he will be forced to increase his selling price. Once you have the input that makes up a product rise, you need to recoup your funds.
“Cement is a major component, from your substructure to your decking; you are basically dealing with cement-based products. Your shell, which is made with cement, is about 55 per cent of your construction before you get into finishing such as plastering. The percentage rise in the price of cement is over 40 per cent; so, definitely it will have a huge impact.”
According to Ajayi, unless there is a decline in costs in other areas such as land, the rise in the prices of houses will be inevitable.
“Effectively, the 44 per cent increase in the price of cement may not translate to the same percentage rise in the cost of houses, because those who already have stock of houses may consider selling at the old prices. But, most developers are looking for a way to fix competitive prices so that they can sell, because if they can’t sell, it is a bigger problem,” he said.