Potentials for Nigeria’s Mortgage Market David Gardner Specialist Consultant Centre for Affordable Housing Finance in Africa (CAHF)
But we have to overcome significant blockages Introduction: The Nigerian Housing Potential Fundamentals are there for housing sector growth… But we have to overcome significant blockages “Good housing makes for good economies and healthy families, and the need is significant” CAHF Yearbook, 2017
Source: CAHF Housing Yearbook (2017) Background: Nigeria’s Housing Market A society desperate for home ownership…. Pop: 186 m GDP: $405,1 bn Massive Population & Growing Economy Urbanisation: Growing Cities 49% / 4.3%pa Home Ownership Rate: Hunger to own 25% Financial Services: Formally Banked (2016): 38% Source: CAHF Housing Yearbook (2017)
Background: Nigeria’s Housing Market Background: Nigeria’s Housing Market ...but struggling to scale its mortgage market Mortgages as % of GDP (2016): low but growing 0,9% (N600-bn) Average Mortgage Loan Size (2016): $28,000? (55,000 loans?) Proportion of Households able to Afford: <10% Cost of Conventional, Formal CAHF House (2016): $43,454
Diagnosis: Nigeria’s Housing Market Buying power exists, but not at the levels we build for
Diagnosis: Nigeria’s Housing Market Cost of housing as it is currently built is relatively high Source: CAHF Housing Cost Benchmarking
Source: CAHF Housing Cost Benchmarking Study (2016) Diagnosis: Nigeria’s Housing Market High Land, infrastructure, materials and labour costs Source: CAHF Housing Cost Benchmarking Study (2016)
Solutions: Nigeria’s Mortgage Market Property market fundamentals matter Government “Oils the gears” of whole housing economy, not just formal market: Prioritisation and consistency Land titling, transfers and perfection of security are key Access to land… at scale and small size Planning, zoning, land use controls Infrastructure networks and transport
Nigeria: Residential Construction and Real Estate Economic Impact Solutions: Nigeria’s Mortgage Market Economic impact of residential construction & real estate Nigeria: Residential Construction and Real Estate Economic Impact Total Employment 2,633,109 + ?? N0-bn 0% N0-bn 0% N0-bn 0% N915-bn 19% N2,956-bn 60% N1,015-bn 21% N58-bn 2% N51,337-bn 43% N3,101-Bn 39% N4,886-Bn 61% N7,987-Bn N7,987-Bn 100% N1,706-bn 55% N7,987-Bn 100% $8,6-bn $13,5-bn $22,2-bn Direct Impact Multiplier: 1.63* N5,404-Bn 68% N0-bn 0% N2,582-bn 32% 4,8% of GDP N = NGN $ = USD * Depends on intermediate input import leakages NOTE: Imputed Value of Owned Housing Excluded
Solutions: Nigeria’s Mortgage Market Recognise that economies and people build houses Economic fundamentals matter (inflation, interest, national debt) Virtuous cycle: Housing finance markets deepen, widen, quicken economic impact - housing builds manufacturing and services sectors Housing mortgages only work if they work profitably (interest, tenor, security, profitability vs Treasury investments & other assets) Liquidity - Stronger links between wholesale and retail finance (NMRC & capital market participation)
Solutions: Nigeria’s Mortgage Market Must focus down-pyramid, and on informal incomes Mortgage Finance barely penetrating the top of the income pyramid: Look down-market at tens of millions of middle income households Significant demand in households who are good credit prospects but with informal or ‘mixed’ incomes Need more affordable housing products for households to purchase as a start: N5-million to N2-million and below Housing as homes and housing as business - rental market & construction industry growth
Solutions: Nigeria’s Mortgage Market Change what and who we finance with mortgages… Smaller housing products (less than 40m2) on less land Less expensive construction (less than N3-million products) Incremental building (finance land & services, core houses) Informal & SMME Incomes “Massive small”: support production by SMMEs and households as a business. Private sector holds the key to success
2. Solutions: Nigeria Mortgage Market Mortgage is a part of a housing Finance Value Chain
Solutions: Nigeria’s Mortgage Market More data, information, knowledge, market intelligence… Chronic lack of rigorous data collation and market intelligence: Breadth and character of financial infrastructure investment; Extent of housing market and transfers; Loan book performance; Uptake of new residential developments. NMRC’s championing of Housing Market Information Portal is welcomed! CAHF looks forward to furthering our collaboration with NMRC to grow understanding of Nigeria’s housing and mortgage markets Market Overview Data; Market Performance Data, Mortgage market data
Conclusions: Nigeria’s Mortgage Market Mortgage finance drives formal housing sector growth Government must create solid framework: housing, finance, facilitation Private sector holds capacity to expand and rapidly grow impact Mortgage market holds key to starting housing sector growth & investment: All must collaborate to understand and grow Nigeria’s housing market – NMRC as champion Drive for effective demand (affordability, availability, willingness): Households and SMMEs will continue to drive housing sector growth
David Gardner Specialist Consultant david@gardner.za.net Thank You! David Gardner Specialist Consultant david@gardner.za.net