The requirements of the NHS is making mortgage access more difficult for millennials.

The requirements of the NHS is making mortgage access more difficult for millennials.

The requirements of the NHS is making mortgage access more difficult for millennials.

7th June, 2022

4 minutes, 3 seconds read

In our previous article on the Nigerian Mortgage System, we looked at some of the Mortgage systems in Europe and established that the low interest rates and long repayment periods are major success factors to their homeownership statistics with a growing ratio of millennial homeowners. Conversely, the relative growth rate in Nigeria is not as rapid due to low accessibility and affordability of commercial mortgage facilities.

The Federal Government in 1994 had instituted the Federal Mortgage Bank of Nigeria as the apex Mortgage institution in Nigeria and through the National Housing Fund (NHF) charged it to mobilise funds for the provision of “affordable” residential houses for Nigerians. While the macroeconomic indices are a major culprit for declining purchasing power in Nigeria, the questions then arise – Is NHF fulfilling affordable homeownership? How many young working Nigerians/Millennials stand a chance to benefit? Does the NHF generate sufficient funding to galvanise its key objective? What is the forecasted funding demand of Nigerians compared to the maximum funds possible from the 4 sources, is there a projected deficit or surplus? How accessible are these funds? What criteria determine eligibility? What flexibilities are built into the system to make the NHF easier and faster to access than the typical financing options?

The NHF act instituted that funding will be generated from –

●       Mandatory contribution of 2.5% of monthly income of Nigerians earning N3000 and above per annum

●       Investments from Commercial banks/Merchant banks - 10% of loan and advance portfolios at a 1% premium on interest payable on current accounts held by banks

●       Investment from Insurance companies - 20% and 40% of Non-Life and Life insurance respectively

●   Contributions from the Federal Government

Obviously, every earning/working Nigerian earns above N3,000 annually. With a minimum wage of N30,000 monthly, 40 % of which is estimated as basic salary, it is assumed that the NHF annual mandatory contribution should be a minimum of N3,600 per contributor. According to the WorldBank, Nigeria’s labour force in 2021 was estimated at 64.4 million people. If NHF gets a minimum of N3,600 from 64.4 million Nigerians, it will have generated a minimum of N232 billion annually from 1 of its 4 sources of funding.

Commercial banks in Nigeria lent out ₦18.9 trillion in May 2020 and typically lend an average of ₦15 trillion MoM according to the June 2020 monetary policy communique of the Central Bank of Nigeria. If 10% of N15 trillion is invested at a 1.1% rate of return per month (1% + current account maintenance charge of N1 per mille), it brings to about ₦198 billion potential annual contribution to the NHF from commercial banks alone. While details of investments from insurance companies and the government are sketchy, from the information above there is a potential minimum funding pool of +N430 billion annually.

Compared with these forecasts, the actual annual realised contribution is much less than 20%. The Managing Director of FMBN reported that the total contribution realised between 2017 and 2021 was an average of N54 billion annually between 2017 and 2021, a significant improvement on the N232 billion that was mobilised from NHF contributors over a 25-year period at an average of N9.28 billion annually. In 2019, the Central Bank of Nigeria reported that an estimate of N21 trillion is required to fund Nigeria's Housing Deficit of 20 million homes. This was based on a population estimation of 200 million. With Nigeria’s growing population and inflation, this estimate will have grown geometrically. In a nutshell, the funding gap is very clear.

The funding requirement is far bigger than the funding supply. What this implies is that the National Housing Fund does not have a sufficient fund pool to provide affordable housing funds to meet everyone’s need. Of course, as with other economic resources, scarcity brings about the need for prioritisation and choice. The NHF has put in place a set of criteria/ requirements for loan application which are:

  1. The applicant must show proof of deducted monthly contributions remitted to FMBN promptly (At least 6 months contributions should be made).
  2. The applicant's Passbook is expected to be updated by an employer and is transferable from one employment to the other.
  3. The applicant’s yearly statement of cumulative contributions plus accrued interest. (The higher your contribution volume, the higher the probability of being considered).
  4. Application must be through an accredited Primary Mortgage Bank (PMB).
  5. The applicant must provide satisfactory evidence of regular income.

Looking closely at these requirements, young Millennials in Nigeria have a much lower chance of accessing funding for homeownership compared to developed countries. The requirement of income regularity and updated passbooks put younger people at a disadvantage. There have been reports where employers had deducted contributions from staff salaries but not remitted to the NHF. Also, contribution volume as a basis of consideration (which naturally favours the older people who have worked longer) makes it even more difficult and further difficult for the growing portion of millennials who are self-employed, working freelance in the informal sector or in startups.

With the economic status of the country, many millennials are unemployed and hence are unable to fulfil the eligibility requirements. According to data from the Nigerian Bureau of Statistics, 13.9 million Nigerian youths were unemployed by the end of 2020.     

Overall, the NHF framework provides a very efficient vehicle that can help Nigeria close the housing deficit. The success of this however is consequent on some policy shifts through continuous consultative process to inculcate changes in demographics, income scales, economic indices and industry trends. We can learn from thriving Mortgage Systems like the examples in Europe and America on inclusion for their young people.

We would love to hear from you. Please send your comments/feedback to research@buyletlive.com



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5th October, 2022

3 minutes, 7 seconds read

Top 3 locations to live as a young family in Lagos

The factors that people consider when deciding on where to live vary with the different stages of life of the individual(s) involved. Things like cost, taste and fashion, proximity to work and family e.t.c are top on this list of factors depending o demography, income level and lifestyle. For instance, the availability of clubs, restaurants and other lifestyle amenities, maybe a major consideration for a young person who enjoys nightlife. On the other hand, a 70-year-old retiree would most likely be more concerned about living in a safe neighbourhood with quality healthcare facilities.  

There are many things to think about and prioritize when choosing a place. Typically, your commute time and, ultimately, the quality of life for you and your family, are influenced by where you reside. Some factors are more readily apparent than others. For young families, figuring out where to live and raise children, especially in “the busy Lagos” can be challenging. We have considered a number of factors, including the availability of quality schools, recreation and health facilities, among others and have profiled the best 3 locations to raise a family in Lagos. While there might not be a perfect location that satisfies all of your demands, hopefully, these suggestions will help you make an informed choice that is right for you.

Lekki Phase 1

Lekki Phase 1 emerged as the number one young-family-friendly location in Lagos State. Historically, Lekki Phase 1 has built a reputation for housing some of the best schools, hospitals and recreation centres in Lagos. Towards the end of 2021, Edusko, an education marketplace did an analysis of top schools in Lagos based on their performance in the international and national examinations, performance in both local and international competitions (academic and extracurricular), as well as their alumni achievements in recent years. Based on the analysis, Lekki Phase 1 houses 31% of the schools that fall within the top 25 schools in Lagos. With respect to healthcare, Lekki Phase 1 is also home to approximately 13% of the top 25 hospitals that we profiled in Lagos. Additionally, Lekki Phase 1 also has more than 20% of family/kid-centric recreation centres in Lagos including Upbeat and Fun Factory.

Ikeja GRA

Coming second on the ranking is Ikeja GRA. The Government Reserved Area is particularly notable for housing some of Lagos’ best hospitals and clinics, including the recently launched 72-bed Duchess Hospital on Joel Ogunnaike Street. Other notable hospitals in the neighbourhood include Reddington Hospital, Eko House Hospital, and Genesis Specialist Hospital, among others. Based on our analysis, Ikeja GRA is home to 12.5% of Lagos' best schools, 25% of the State’s best hospitals, and up to 20% of the City’s best recreation centres. Outside its serenity and good road network, Ikeja also has the most family-friendly restaurants, grocery stores and a lot of fun places for you and your young family to bond.

Ikoyi

Ikoyi is notably expensive, but if you are looking for a place where your kids can meet the children of the big wigs in society, then it might just be the best place. Gleaning from our analysis, Ikoyi emerged as the 3rd best location to raise a family in Lagos. With 9.4%, 12.5% and 20% of the best schools, hospitals and recreation centres respectively located here, Ikoyi is an ideal location to raise kids, with a quality of life that is almost at par with what you will find in some of the most advanced cities around the world. 


Closing thought

Barring concerns about high rental/property value, and some other personal nuances, Lekki Phase 1, Ikeja GRA and Ikoyi are the top 3 locations to raise your family in Lagos. In the end, the location you choose will be the one that checks off enough of your own requirements. Having said that, we hope that some of the three factors we've outlined in this piece will be helpful to you the next time you're trying to pick where to reside.

If you are looking to rent or buy an apartment or get a shortlet, go to BuyLetLive.com and find properties that meet your requirements. If you are an agent, developer or landlord, visit the signup page on BuyLetLive.com to create an account and advertise your properties.

We like to hear from you. Send us your comments to research@buyletlive.com and follow us across all our social media pages to keep updated.

26th September, 2022

2 minutes, 52 seconds read

Surging Inflation and how it is impacting the Lagos Residential Rental Market

In the last 12 months, Nigerians have referred to the economic situation as very daunting, especially for new renters in Lagos. With inflation surging over 20% in August 2022, the economic climate has not been very favourable for most low to middle-income earners in Nigeria. As the rising cost of goods and services continues to drive people to spend more in exchange for fewer items, Nigerians are constantly looking out for opportunities to cut down their expenses. 

One way we have seen this play out is in regard to new leases. Over the last half year, our interaction with real estate agents in Lagos has shown that existing tenants who before now considered moving to new apartments are reconsidering. The reasons for this move seem obvious. Cost! When we dug deeper, we found out that moving at this time can cost you almost twice what it will take to continue in your current space, and prospective renters have come to this realization. But why is this?


Rent has surged over 20% in the past 12 months.

If you are looking to rent a new apartment, it is most likely that you will spend 20% more for the same type of apartment in the same location than you would have one year ago. For tenants who have stayed long in their old apartment, the percentage increase will likely be more than that. Where the apartment is newer, especially with modern amenities, the additional premium being charged by Developers and Landlords can go as high as 30% or more depending on the location. When considered holistically, this additional rental burden is a major discouragement for people looking to relocate or move into newer apartments.


Agency commission, legal fees and caution deposits can cost as much as 50% of the rent.

In most parts of the world, traditional estate agents' fees range from 0.5% to 5%, depending on the value of the transaction and negotiating power of the parties. In the UK for instance, the range is 0.75% to 3% according to MoveWise, a UK-based real estate advisor. In the US, the commission is usually between 4% to 6%. Across most African cities, the percentage is higher and can range between 5% and 10%. We have found that for residential rentals especially of less than 10m value, most agents usually insist on a 10% agency commission. In some locations around Lagos, they can go as high as 20% for rental properties of less than a million. In addition to this, a 10% legal fee is usually mandatory, and some landlords can charge as high as 20% extra as a caution deposit. The impact of this is that it shoots up the total amount that prospective tenants end up paying for new leases, and has been a major discouraging factor for most prospects.


The additional hassle of moving and settling in can be very daunting in busy Lagos

Relocation costs can make things worse, but outside the financial cost, the hassle that comes with it wears out quite a number of people. Based on a sample relocation cost quote we got from Packmyload and a number of other Nigerian-based logistics companies, it costs a minimum of 150,000 to move furnishing items in a 2-bedroom apartment in Ikeja to Lekki Phase 1. Judging from the average rental price data that we are currently tracking Lekki Phase 1, this means that a prospective renter will need to pay between 5% and 10% of the rent on logistics.


Closing thoughts.

When considered individually, these costs may be insignificant but can sum up to almost the same amount that a prospective tenant is paying as rent, or even more. What has been your experience with renting a new apartment in Lagos? Share with us by sending a DM or commenting on our social media handles. 


If you are looking to rent or buy an apartment or get a shortlet, go to BuyLetLive.com and find properties that meet your requirements. If you are an agent, developer or landlord, visit the signup page on BuyLetLive.com to create an account and advertise your properties.