Having a space that is truly yours signals stability and accomplishment. Home ownership is crucial to financial freedom, increases your networth, provides rental savings and increases your investment and leverage potential. In contrast, house rent is plain vanilla expenditure, which provides the renter with no returns, asides providing you a place to lay your head. In addition, all further expenditure on house repairs and maintenance also hold no long term value for the renter. Finally, rent puts you at the mercy of the house owner with respect to major house repairs and rental rates.
Have you ever thought about paying in mortgage rentals, the same amount you would have paid in rent or just slightly higher? But the property is yours, appreciating annually; sometimes having the value appreciation on your house exceeding your annual mortgage payments.
Basically, have you considered buying your home with a convenient payment plan or on a mortgage? You begin to pay yourself rather than paying your landlord. If well planned, when you combine the annual rental savings (rent that you would have paid for living in a similar property), with annual capital appreciation (increase in the house value) of the house purchased, mortgage rental payments would be less (even in the Nigerian high interest rate regimes). This implies that, if well structured, value addition is greater than value expended on annual mortgage rentals; plus the sense of security and stability that owning your home delivers which is unquantifiable intangible value. Imagine planning to own your home by the time you are 30 years old and beginning to work towards it from getting your first job.
Rather than looking at options available, speaking to real estate advisors and working with experts in the industry, many young people and families shove home ownership aside as a task for the “later” future and resort to paying rents perpetually. This is based on the perception that the process of buying a first home is daunting and not easily surmountable. In addition, the attendant responsibilities and obligations in conjunction with the lack of requisite information and attendant challenges in an emerging economy like Nigeria also contribute to making the process appear arduous.
On the flip side, developers need to start building homes with the middle class in mind. There is a spate of developments across major cities like Lagos, Abuja and Port Harcourt that are priced significantly high, and with stringent payment plans that make home ownership almost unachievable for the middle class, forcing them to close their minds to its immediate possibility until they get a windfall. Developers need to start partnering with financial institutions when planning real estate developments to ensure there are financing opportunities tied to their projects, which are available to buyers of units from those projects.
In addition, the focus of developers needs to shift from a wide profit margin business model, to turnover model. This will ensure that the houses are rightly priced, easier to access by middle income earners who are available in massive numbers for home purchase, and will also ensure that the houses don’t stay in the market for too long.
The solution to middle income home ownership requires the cooperation of developers and financiers, coupled with a determination by the middle class to get on the home ownership ladder by scouting for suitable products and financing opportunities existing in the market.
. Adebayo-Adedayo writes from Lagos.