Harsh economy: Renting, building a house, which is best option?

Amid the harsh economic reality in the country, there is a debate among Nigerians on the cheapest way of getting shelter, one of man’s most basic needs. While some people argue that renting a property is convenient and affordable rather than building a house with the fluctuating and rising prices of building materials, others believe […]

Amid the harsh economic reality in the country, there is a debate among Nigerians on the cheapest way of getting shelter, one of man’s most basic needs. While some people argue that renting a property is convenient and affordable rather than building a house with the fluctuating and rising prices of building materials, others believe that payment of rent doesn’t create wealth and will always leave tenants at the mercy of landlords.

Many economic factors affect property business and dynamics of the sector, among them are inflation and lending rates, as well as exchange rates.

Daily Trust reports that data from the National Bureau of Statistics (NBS) showed that headline inflation rose to a 28-year high to 33.95 per cent in May. These inflationary pressures are set to have a direct impact on the property sector. The removal of fuel subsidy has been one of the major drivers of inflation in Nigeria in the last one year.

Also, exchange rates play a critical role in the property sector due to the fact that most building materials are imported. The Central Bank of Nigeria (CBN), in June, devalued the naira and since then the instability in the exchange rate market has been a cause for worry to the private sector and investors.

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The naira now trades at between N1,400 and N1,500 to the dollar from N490 in the official market and N700 at the black market last year.

Similarly, the Monetary Policy Committee (MPC) of CBN increased the benchmark interest rate by 150 basis points from 24.75 per cent to 26.25 per cent.

The implication is higher lending rates to real estate and property developers who will in turn find a way to recover their investments by charging higher rents or amounts for selling property.

Nigerians react

Daily Trust spoke to a cross section of Nigerians on the subject. A civil servant, Abdulqadir Tanimu, said he was renting an apartment but also building a house as he did not like the idea of renting.

He said, “The reason I am doing this is because I don’t like the idea of renting, and I want to come back to a house I can call my own. If you’re renting, just know that at any time your landlord can kick you out, and secondly, landlords just take advantage of the economy to exploit tenants.

“Only recently, our landlord increased our rent from N500,000 to N800,000, and while we were complaining, other tenants in the neighbourhood said theirs had been increased from N500,000 to N1m. It’s just exploitative and I can’t bear it anymore. The best option is to build my house where I and my family can call our own.”

Similarly, a businessman, Ikechukwu Ani, said that building a house was a better option than renting, noting that renting a property, especially in Abuja and Lagos, was gradually becoming Herculean.

He said, “If you’re renting a house in Abuja, it will be like you’re working for your landlord, because even ordinary self-contained homes in the most modest places are expensive, let alone one-bedroom or two-bedroom.

“Even houses in slums and villages go as high as N800,000. So, that is to show you that renting a house is not just a good idea; at least not for so long.”

However, in contrast, another resident of the FCT who works with a private firm, who simply identified himself as Bulus, said that renting a house was far more flexible than building one.

He said, “When you rent, you become conscious of exactly how much your housing expenses are. This is even better and cheaper if you take out a two or five-year lease.

“Renting is cheaper since there are no upkeep or repair costs. The absence of maintenance and repair expenses is one advantage of renting a home. This means that when you rent a property, your landlord is obligated to repair or replace anything that stops working. But as a house owner, you have to take care of your property.”

In the same vein, a business woman, Fatima Bala, believed that renting was better than building a house.

She said, “Renters save money by having access to amenities that would otherwise be quite expensive if they had to pay for them themselves. Many midscale and serviced apartment buildings include luxuries like an indoor pool or a fitness centre as standard features at no extra cost to renters.

“These luxuries would probably cost a homeowner a lot more money to install and maintain if you want to have them.”

What experts say

Speaking, the immediate past President of the Real Estate Developers Association of Nigeria, Aliyu Wammako, told Daily Trust that none of the two options was easy to explore at the moment considering the current economic situation.

He said rent in major cities and other states had hit the rooftop while the cost of building materials was also expensive.

He said, “Let’s look at Abuja, Lagos, Port Harcourt and other major cities; to rent a four-bedroom duplex costs nothing less than N7m to N10m per annum, and the least you can get is between N500,000 and N2m; that is just for a room and parlour or boys quarters. So, renting itself has become expensive.

“On the other hand, the cost of building materials has skyrocketed as a bag of 50kg cement is about N7,500, a block costs between N450 and N490. Sadly, the Federal Mortgage Bank of Nigeria, which is the major lender, has about 4.5 million contributors to the National Housing Fund, but up till today, it hasn’t met up to five per cent of the requirements. So, the lending capacity is not even there.”

Also speaking on the issue, the Customer Service Manager at MSHEL Homes Ltd, Favour Ibrahim, noted that with the current economic situation, whether to build or rent a house depended on certain factors.

She said, “Building a house can be a long-term investment and a valuable asset, but it also requires a significant upfront capital expenditure. On the other hand, renting a house provides flexibility and lower upfront costs but may mean paying rent indefinitely.”

She noted that certain factors should be considered, especially in terms of affordability, as one needed to compare the cost of building or renting a house.

She said, “Also, financial stability should be considered gauging your income stability and ability to maintain mortgage payments or rent. Similarly, location is as well critical to evaluate the area’s growth prospects, security and access to amenities.”