Housing Deficit and Its Advantage for Smart Investors

January 26, 2023by Sterling Homes0

Research has shown that about 900 million people around the world live in slums, lacking access to adequate water and sanitation or adequate housing. It is estimated that 1.6 billion people, a fifth of the world’s population, would lack access to secure, adequate, and affordable housing by 2025.

The United Nation’s statistics indicated that the housing deficit in Nigeria are estimated at 22 million homes. In the next ten years, the number of Nigerians with no homes would have doubled if care was not taken. Real estate is a good investment since it is a historical store of wealth that never loses value and constantly appreciates. But surprisingly, many Nigerians, particularly youth, are not mounting on the sector.

However, Nigeria’s Real Estate sector is growing fast — the 6th largest sector of the economy at about 8.1 percent of GDP. Despite the growth, the quality of housing stock in Nigeria is poor because the construction industry is driven by cost minimization rather than value maximization.

According to the Federal Mortgage Bank of Nigeria (FMBN), the housing deficit is estimated at between 17 to 20 million housing units, increasing annually by 900,000 units, with a potential cost of N6 trillion (US$16 billion).

Investors should always keep tabs on current market conditions. Doing so helps the decision-making process regarding how to react to the market, such as whether to buy, sell, or hold.  A housing shortage exists when there are less than six months of inventory. When that happens, there’s a shortage of homes for sale, and the market is said to be a seller’s market, where sellers call the shots.

Housing shortages occur because of supply and demand for any particular location changes. The market always reacts by trying to reach equilibrium, but in the case of housing, a balanced market doesn’t happen overnight. If there’s a glut, it takes time to sell the excess properties. If there’s a shortage, it takes time to get more housing built.

Smart investors have the potential to make considerable contributions to economic growth through private residential investments like the construction of new homes and through consumption spending on housing services. In return, this will generate more wealth for them and also solves the housing deficit problem in the country.

The real estate sector has the inherent potential to support employment generation and economic inclusion. The dominant strategy from the 1950s through the 1980s was to construct public housing as high-rise buildings, which often led to further concentration of poverty and economic distress (Florida, 2017).

A world in which only a few can afford housing is not sustainable. Everyone deserves a safe place to live. It can transform the quality of life of individuals and families. The real estate sector has a lot of possibilities for motivated individuals and entrepreneurs, and there must be reformed protection so that the fears many Nigerians hold against investing in the sector fade over time.

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