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INCREASING PRICE IN HOUSING MATERIALS AND ITS EFFECT ON
HOUSING SUPPLY
CHAPTER ONE
INTRODUCTION
1.1 Background of the Study
The
dream of each Nigerian citizen is to own his own house (Alhwish, 2010).
However, economic Problems began to arise in Nigeria some years ago that have
made this dream very difficult to achieve. These problems are complicated, so
each specialist in the field of housing and construction holds a unique opinion
regarding the main causes of the problems. The main obstacle that consumers
face at present is the drastic increase in housing and construction prices in
the mega cities of Nigeria. The present study focuses specifically on housing
and construction in Abuja.
Nigeria’s
main source of revenue is the production of oil. Now that Nigeria’s federal
capital territory is receiving a great influx of residents, construction and
housing has become the country’s major field in the country’s economy after the
oil field Badran (2012).
The
growth of this field has come with a sudden rise in the prices of construction
and housing, especially in Abuja. This increase has been so problematic that
“The prices of construction materials are the next crisis of the Nigerian real
estate market” (Alhwish, 2010). The causes of these high prices have yet to be
investigated, and they could be numerous and intertwined.
1.2
STATEMENT OF THE PROBLEM
The
demand for more construction of all types, coupled with a tight income supply
has provided the construction industry with a big challenge to high cost of
housing and building construction.This substantial increase has brought
disinvestment in the construction industry and
added investment risks. One of the main problems of the
construction and housing industry may be attributed to the influence of the country’s
main industry, oil. Badran (2012) observed, “Expectations of rising prices of
building materials are in line with the rise of oil.” As the oil price
increases it creates more problems, and these problems, in turn, increase the
construction and housing prices even more. Therefore, the relationship between
high oil prices and problems in the housing and construction industry is
positive (directly proportional).
Other
challenges include the high demand for development of public works projects,
such as schools, hospitals, and infrastructure, the high demand for housing and
construction by Nigerian citizens, The Low supply of housing (Nigeria economic
survey, 2012).The manipulation and monopoly of suppliers of cement, steel and
other construction materials, Corruption in monitoring government projects, The
existence of a black market ,The high inflation of rate, Contractors who are
taking projects beyond their capacity, the Speculative purchase and corruption
in selling undeveloped lands.
1.3 AIM AND OBJECTIVES
The
aim of this study is investigate on the factor that leads to high cost of
housing construction in Nigeria.
The
objectives of the study are as follows:
•
To
investigate the critical factors that leads to a drastic increase in housing
and construction prices in F.C.T Abuja.
•
To
determine the problems affecting construction cost in Nigeria.
•
To
determine the factors that would help government in addressing the major
1.4 RESEARCH
QUESTIONS
The
following are the research Question that will guide the study:
•
What
are the main factors that lead to high cost of housing construction in the
Federal capital territory, Abuja?
•
What
are the effects of the factors in housing construction industry?
1.5 SCOPE AND LIMITATION OF THE STUDY
The scope of this research is limited to investigation of
essential factors that lead to high cost of housing construction and proffering
solutions on how to reduce construction cost in Nigeria.
The study
is limited to projects in the F.C.T Abuja Nigeria because there is easy access
of information in the Abuja by the researcher.
Target
respondents for this study are the principal actors in the construction
industry namely: the Client, the Consultant and the Contractor.
The
present study is about the current situation in Abuja, Nigeria. In addition,
the study is focus only on residential buildings (houses and apartments).
1.6 PURPOSE OF THE STUDY
Nigeria suffers from
deep problems that underlie housing and construction
Companies,
so this thesis aspires to reveal the main hidden factors of these problems. One
of the reasons is population growth. Specifically, the average age in Abuja is
a mere 18years. Moreover, Nigeria’s population growth rate is 2.90 % (Central
Department of Statistics and Information, 2012). Oil prices also seem to be an
enormous factor, because a higher oil price will make everything else cost
more, such as transportation of personnel, shipping of materials, manufacturing
and so on. Another factor is the underlying economic problems, such as
inflation. In addition, government projects, such as subsidized schools and
hospitals that help to cover the high population growth, seem to be
contributing to higher prices. Likewise, a greater number of projects for
public works might be another factor.
The
aforementioned factors, among others, have led to a 200% increase in the
housing construction cost.
1.7 RESEARCH HYPOTHESES
By
examining the literature, the researcher has extracted the factors that could
be behind the high cost of housing construction prices. The analysis of these
factors has been conducted using a survey. The following factors have been
identified and the main hypothesis is that they all contribute to the rise in
housing construction cost.
1)
Rise in Oil Prices: The increase in world oil demand in the past ten years,
nearly 50 percent increase, led to the rapid increase in oil prices.
2)
High Demand for Housing Construction: This category includes high demand from,
a) Nigeria’s citizens, b) government housing projects and c) government public
projects.
3)
Low Housing Supply: This category includes the increase of annual demand for
housing units and the low supply of housing units.
4)
Speculative Purchase of Undeveloped Lands: This category includes corruption in
the selling process of undeveloped lands.
5)
High Inflation Rate: This category includes the continuous increase in
construction materials regarding the inflation factor.
6)
Other Factors, such as: the absence of government’s role in monitoring prices,
corruption in monitoring government projects, and contractors who take projects
beyond their capacity.
1.8 RESEARCH METHODOLOGY
The survey intends to
adopt:
1)
The methodology of identifying the factors.
2)
How to identify the experts who could help complete the survey.
3) The appropriate
methods to analyze the data.
In
addition, certain factors were evaluated and analyzed to identify the key
factors of cost increase in housing and construction industry in Nigeria. The
factors that were analyzed include economic, geographic, demographic, social,
and other environmental factors to provide accurate and reliable information
regarding the cost rise in Nigeria’s construction industry. In the end, some
strategies are proposed to help Nigeria’s construction industry reduce its
construction and housing costs.
1.9 METHOD OF DATA COLLECTION
Data for the purpose
of this study will be collected through primary a source, that is through the
use of questionnaires’ as well as secondary sources like: Journals, articles
and financial reports.
1.10 METHOD OF DATA ANALYSIS
Frequency and
percentages were used for the descriptive data, while mean and standard
deviation were use for data analysis.
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