Mortgage and Housing Trends

Note: Construction, Real estate and GDP Growth rates were derived courtesy of National Bureau of Statistics published data as part of its reports covering the period of Q1 2016 – Q2 2021.

Construction & Real Estate: Real Estate Sector grew by 3.85% in Q2 2021 from 1.77% in Q1 2020 and -21.99% in Q2 2020 while Construction sector grew by 3.70% in Q2 2021 from 1.42% in Q1 2020 and -31.77% in Q2 2020. 

Residential & Commercial Property Updates: As a fallout from the reopening of the economy and growth in construction and real estate sectors in Q2 2021, Landlords are beginning to raise rental and property values due to increased demand and high cost of finishing materials. In terms of the demand side, there is increase in the development of 2- & 3-bedroom house types, serviced & shared apartments, with reduced demand for duplexes and self-contained units. In terms of location preferences, offtakers are moving towards more gated estates due to rising insecurity, while in terms of commercial transactions, short-lets and overnight stays (Airbnb) are gaining increased preference over traditional hotel models and long-term residential rentals.

Impact of Inflation & Economic Trends on Housing: Nigeria’s real estate sector has been severely affected by the advent of the Covid-19 pandemic. In recent years, there has been a strong squeeze in consumers’ purchasing power, resulting in low effective demand for housing. The aggregate supply of housing in Nigeria has also been affected by a high level of inflation. The spectrum of essential building materials particularly finishing materials like aluminium, roofing sheets, and iron rods are imported due to insufficient local supply though importation is currently hampered by exchange rate volatility. According to National Bureau of Statistics, the price of aluminium has spiked by 33% to $2,650/metric tonne while cement is also up 150% to N4,000 per bag as of 2nd Quarter 2021.

FGN Seeks FMDA Collaboration for Housing Finance: The office of the Vice President has charged the nation’s financial market dealers to collaborate with government with concerted efforts towards tackling Nigeria’s housing problem adding that this will see to the development of a housing blueprint for the nation’s teeming population.

AMCON Empowered to Sell Debtors’ Properties:  The House of Representatives has passed for third reading, an amendment to the Asset Management Corporation of Nigeria Act which empowers the corporation to trace and sell any property belonging to a bank debtor, including those not presented as security for defaulting credit facilities.

Note: NMRC Refinance Rate and Mortgage Interest Rate were derived courtesy of NMRC Analytics (in-house data and mortgage bank surveys) while other indices like MPR (Monetary Policy Rate), Inflation Rate and 10 & 20 Year FGN Bond were derived from the Central Bank of Nigeria, Debt Management Office and National Bureau of Statistics published data as basis for our comparative rates chart covering the period of January 2017 – September 2021.

2022-2024 MTEF/FSP: The Senate has passed the 2022-2024 Medium Term Expenditure Framework and Fiscal Strategy Paper (MTEF/FSP). The MTEF/FSP includes FGN’s revenue projection of N8.36 trillion; fiscal deficit of N5.62 trillion; new borrowings of N4.89 trillion – an amount which includes Foreign and Domestic borrowing and proposed expenditure of N13.98 trillion with approved crude oil production of 1.88mbpd, 2.23mbpd, and 2.22mbpdnt for 2022, 2023 and 2024. The Senate in its recommendations approved the Benchmark oil price of $57 per barrel; adopted the Exchange Rate of N410.15/US$, projected GDP growth rate of 4.20% and 13% targeted inflation rate.

FAAC & Sustainability of State Governments: The Federation Accounts Allocation Committee (FAAC) shared a total of N696.965 billion in August 2021 to the Federal, States and Local Governments. Analysts at budget tracking and analysis think tank “BudgIT” also stated in its report ‘State of States, 2021 edition’ that only three States namely Lagos, Rivers, and Anambra can survive on internally generated revenue without support from the Federation Accounts Allocation Committee.

Shareholders Demand Reduction in CRR: Following the negative impact of the Cash Reserve Requirement (CRR) by the Central Bank of Nigeria is having on banks’ profitability, shareholders of banks have expressed displeasure over N12.73trn restricted deposits with the CBN that is not available for banking operations.

Nigeria’s Green Bonds Market Hits $136m: The value of Nigeria’s green bonds market has hit $136 million within three years with four issuances recorded since the debut issuance by the Federal Government in 2019.

NPL’s on the Decline but Above Benchmark: The non-performing loans of the banking sector slightly declined from 5.8% in May to 5.7% in June, indicative of a more resilient banking sector. The Central Bank of Nigeria disclosed this in during the September 2021 Monetary Policy Committee meeting.

Increased Demand for FX as Store of Value: According to research publications by the Central Bank of Nigeria, Nigerians have been accumulating foreign currencies to protect their wealth from Naira volatility and surging inflation. This research finding is coming on the heels of stakeholders raising concerns over the worsening scarcity of forex in the country and their having rationalize labour as a cost cutting measure towards addressing shrinking profitability. 

Ethical Investments on the Rise: The changing financial landscape with focus on impact and sustainability is driving demand for ethical investments. According to analysts at Pension Operators (PenOps), the trend is reflective in the growth of the Net Asset Value (NAV) of non-interest finance related instruments and Funds in Nigeria. In terms of portfolio dynamics ethical funds in Nigeria grew by 174 % between December 2019 and August 2021.

Nigeria Issues Eurobond: According to the Debt Management Office (DMO) press release Nigeria has raised the sum of $4Bn through Eurobonds which issued in three tranches with the 30years long term dollar bonds having a rate of 8.25%. The development has been welcomed by the financial markets as a step in the right direction, citing fundamentals and potentials of the nation’s economy as being strong with the capacity to meet its debt obligations.

IMF’s Borrowing to Nigeria & Other LIC’s to Hit $48bn: The International Monetary Fund (IMF) has projected that its financial assistance to low-income countries, most of which are in Africa like Nigeria, could hit $48 billion covering the current COVID-19 pandemic and its immediate aftermath.

World Bank Suspends Ease of Doing Business: The World Bank Group on has cancelled the entire “Doing Business” report on business climates. The decision was linked to independent internal audit and investigation that raised allegations bothering on “ethical matters, including the conduct of former Board officials, as well as current and/or former Bank staff applying “undue pressure” on staff to boost China’s ranking in the bank’s “Doing Business 2018” report.

NMRC & Gateway Bank: The Management of Nigeria Mortgage Refinance Company Plc as part of its collaboration with Gateway Bank inspected the delivery of the recently complete the Prince Court Estate, Kobape financed by the company through Gateway Mortgage Bank Limited. About eight states have benefited from about N30 Bn of mortgage refinance by NMRC in the last four years. NMRC’s decision to partner with Ogun State was premised on the adoption of the foreclosure law. The Management of Gateway Mortgage Bank noted that the N1billon had been disbursed to beneficiaries who have been screened and found qualified for the housing scheme at 11% and with a 15-year tenor.

NMRC & ACAEBIN 50th General Meeting: The Nigeria Mortgage Refinance Company hosted finance and audit experts at the 50th Quarterly General Meeting of the Association of Chief Audit Executives of Banks in Nigeria (ACAEBIN). As part of the engagement the Managing Director of NMRC in his keynote address noted that the failure of many corporate giants like Enron and some of the liquidated local banks in Nigeria, had been attributed largely to poor corporate governance, driven by poor organizational culture and that building and sustaining a good corporate culture was critical to the stability and survival of institutions and the Nigerian financial system.

AG Mortgage Skips Dividend Payment: The Management of AG Mortgage Bank Plc announced that due to its capital impairment, it will not pay dividends to shareholders for fiscal year ended December 31, 2020. The firm is skipping the dividend payment despite growth in its earnings, cut in operating costs, and management of cost. Analysis of the financial results of the company show that its gross earnings grew by 15 per cent from N945 million in 2019 to N1.08Bn in 2020, while the profit before tax rose by 172% from N66Mn to N180Mn, with the post-tax profit rising by 405% from N22 Mn to N111 Mn. Also, the total deposits stood at N4.8Bn as of December 31, 2020, higher than the previous year’s figure of N3.4 Bn by 41%, while the total assets went up by 28% from N12.5Bn to N16Bn, with shareholders’ funds increasing by 26% from N5.1 Bn to N6.4Bn.

Abbey Mortgage Rebrands: The Management of Abbey Mortgage Bank unveiled the new Abbey Bank logo signifying the rebranding of the 29-year mortgage lending institution and establishment of a modern direction. The management also noted that the institution has returned to the path of profitability and significantly grown it customer base, balance sheet and share of the market. Abbey’s mission is to become the first choice for mortgages housing finance and investments and the rebranding is expected to reposition the bank to be able to occupy its pride of place as a clear leader in the sub-sector with the introduction of e-banking channels and USSB platforms that would empower customers to transact seamlessly.