EFFECT OF RISING COST OF BUILDING MATERIALS ON PROPERTY DEVELOPMENT IN ENUGU

EFFECT OF RISING COST OF BUILDING MATERIALS ON PROPERTY DEVELOPMENT IN ENUGU

ABSTRACT

The rising cost of building materials has become a critical issue affecting property development activities worldwide, particularly in developing regions such as Enugu, Nigeria. This study examines the impact of escalating building material costs on property development in Enugu, identifying the main contributing factors, assessing their effects on development activities, and exploring the implications for housing affordability and quality. A quantitative research approach was employed, utilizing a structured questionnaire distributed to 150 stakeholders in the property development sector, including developers, construction companies, architects, quantity surveyors, building material suppliers, and regulatory authorities. A total of 140 valid responses were analyzed. The findings reveal that inflation, currency fluctuations, and supply chain disruptions are the primary factors driving the rising costs of building materials in Enugu. These cost increases have led to significant delays in property development projects, the use of lower-quality materials, and the scaling back or cancellation of some projects. Additionally, the study finds that rising material costs have reduced housing affordability, pushing more people into informal settlements and undermining efforts to provide adequate housing in the region. The study highlights the need for strategies to mitigate these impacts, including promoting the use of locally sourced materials, adopting innovative construction techniques, and implementing supportive government policies. The study concludes that a multifaceted approach involving both public and private sector stakeholders is necessary to address the challenges posed by rising building material costs. Recommendations include promoting local material sourcing, enhancing supply chain efficiency, supporting innovative construction methods, and enacting government policies aimed at stabilizing prices. These strategies are essential for fostering a sustainable property development environment in Enugu and ensuring access to affordable and quality housing for all residents.

CHAPTER ONE: INTRODUCTION

1.1       Background Of The Study

The real estate sector plays a crucial role in economic development by providing housing, infrastructure, and employment opportunities. In many developing countries, including Nigeria, the construction industry is a significant contributor to national Gross Domestic Product (GDP) and a vital component of economic growth (Onyema, 2021). However, in recent years, the rising cost of building materials has emerged as a critical challenge, particularly in cities like Enugu, where property development is integral to urban expansion and development efforts.

The rising cost of building materials in Nigeria has become a significant concern over the past few decades, reflecting both local and global economic dynamics. Historically, the construction industry in Nigeria has been heavily influenced by fluctuations in the prices of essential building materials, which in turn affect property development and housing affordability. In Enugu, a key city in southeastern Nigeria, this issue has been particularly pronounced due to the city’s rapid urbanization and increasing demand for housing and infrastructure.

In Enugu, the cost of construction materials such as cement, steel, tiles, and roofing sheets has been on a steady rise, driven by various factors, including inflation, foreign exchange rates, and supply chain disruptions (Eze & Okonkwo, 2023). This upward trend in prices is exacerbating the cost of property development and, by extension, housing affordability. According to the National Bureau of Statistics (2022), building material prices in Nigeria have increased by over 30% in the past five years, significantly affecting property development dynamics.

Building materials cannot be precisely defined, but it covers a wide range of materials basically used in the building construction industry, these materials vary from their natural state to those partially or completely processed in the manufacturing industries. Therefore building materials include aggregate, bricks, timber, ceiling, cement, paint, doors, Windows, roofing sheets, iron and steel product, sanitary waves, electrical fittings etc. building materials includes material components used in building industry. The fluctuations in the cost of building materials have a pronounce effects on property investment (rental value) in Nigerian society. The fluctuation in the cost of building materials began in civil war. The changes could be attributed to a number of factors such as government policies, that is, effect on modern technology which necessitated the development and use of new materials and quicker methods changes in tastes of client due to need for better housing, high professional service charge etc. these factors continue to present themselves and if they are ignored as it is the case now they will continue to pose problems on the generality of the populace because of the psychological, social and economic effects on the property value in whatever form, be it residential, commercial or industrial. The project is aimed at assessing the relationship between the cost of building materials and rental value of residential property and at the end of the findings, possible control measures shall be propose as recommendations

The impact of these rising costs is not limited to developers alone; it extends to prospective homeowners, tenants, and the broader economy. Higher building material costs often translate into increased property prices and rents, making housing less affordable for the general population (Adeniran & Ojo, 2022). For Enugu, a city experiencing rapid urbanization, this trend poses a significant challenge to sustainable development goals, particularly in addressing the housing deficit and improving living standards.

Furthermore, the escalating prices of building materials are partly attributed to the country’s heavy reliance on imported goods. Many essential materials used in construction, such as steel and finishing products, are imported and subject to fluctuations in international markets and exchange rates (Mba, 2023). This dependency makes the local construction industry vulnerable to global market changes, further inflating costs and complicating the economic feasibility of property development projects.

The situation is compounded by inadequate local production capacity and inefficiencies in the supply chain, which contribute to scarcity and further price increases (Chukwuemeka & Nweke, 2021). Additionally, policies and regulations affecting import tariffs, duties, and local production taxes impact material costs, leading to uncertainties for developers who must factor these into their project budgets (Uche, 2022). As a result, many projects are delayed, scaled down, or abandoned altogether, reducing the supply of new properties in the market.

In Enugu, the property development sector is predominantly driven by private developers, many of whom face challenges in accessing affordable financing (Okoye & Nnamani, 2023). Rising construction costs, therefore, impose additional financial burdens on developers, who often have to seek costlier short-term loans or compromise on quality to maintain project viability. This situation poses a risk of increased incidences of substandard buildings, which can have dire consequences for safety and urban aesthetics.

The social implications of rising construction costs are also significant. As property prices soar, middle- and low-income earners find it increasingly difficult to afford decent housing, pushing many into informal settlements and slums (Adedeji & Aluko, 2023). This trend contributes to urban sprawl, environmental degradation, and increased socio-economic inequalities, making it difficult for cities like Enugu to achieve inclusive and sustainable growth.

Recognizing these challenges, there is a growing need for comprehensive policy measures and innovative strategies to mitigate the impact of rising building material costs on property development (Obi, 2022). Such measures could include promoting local production of building materials, encouraging the use of alternative construction methods, and providing subsidies or incentives to developers. Addressing these issues is critical to fostering a more resilient property development sector in Enugu.

The rising cost of building materials presents a complex challenge that affects various stakeholders in Enugu’s property development sector. Addressing this issue requires a multi-faceted approach involving government policy interventions, private sector innovation, and increased local capacity for material production. Only through such coordinated efforts can Enugu hope to overcome these challenges and achieve its urban development goals sustainably.

1.2       Statement Of The Problem

The rising cost of building materials poses a significant problem for property development in Enugu, Nigeria. Over the past few years, the prices of essential construction materials such as cement, steel, and roofing sheets have surged dramatically, often outpacing inflation and wage growth (Eze & Okonkwo, 2023). This trend has created a substantial barrier for property developers, who now face increased construction costs that can make projects financially unfeasible. The consequences of these rising costs are not limited to developers but extend to prospective homeowners, tenants, and the broader economy, highlighting the need for urgent intervention.

One of the primary problems resulting from increased building material costs is a significant reduction in housing affordability. As developers pass on the additional costs to buyers and renters, property prices have soared, making it increasingly difficult for middle- and low-income earners to afford decent housing (Adeniran & Ojo, 2022). This situation exacerbates the housing deficit in Enugu, contributing to overcrowded living conditions, the proliferation of informal settlements, and a decline in living standards. Furthermore, the lack of affordable housing options undermines efforts to promote social equity and inclusive growth in the city.

Another critical issue arising from the rising cost of building materials is the delay or abandonment of construction projects. Developers often experience financial strain due to escalating material prices, leading to project delays, downsizing, or outright cancellation (Okoye & Nnamani, 2023). These disruptions negatively affect the local economy by reducing employment opportunities in the construction sector and diminishing economic activities related to property development. The cumulative effect is a slower pace of urban development and a failure to meet the growing demand for housing and infrastructure in Enugu.

Additionally, the continuous increase in material costs has led to a decline in construction quality. To cut costs and stay within budget, some developers resort to using substandard or alternative materials, which may compromise the safety and durability of buildings (Chukwuemeka & Nweke, 2021). This practice poses a serious risk to public safety, as poorly constructed buildings are more prone to structural failures, which can result in loss of life, property damage, and heightened vulnerability to environmental hazards. Therefore, addressing the problem of rising building material costs is critical to ensuring sustainable property development and maintaining safety standards in Enugu.

1.3       Aim and Objectives of the Study

The aim of this study is to examine the effects of the rising cost of building materials on property development in Enugu, Nigeria..

To achieve this aim, the study will pursue the following specific objectives:

1. To analyze the factors contributing to the rising cost of building materials in Enugu.
2. To evaluate the impact of rising building material costs on property development activities in Enugu.
3. To assess the implications of increased building material costs on housing affordability and quality in Enugu.
4. To recommend strategies for mitigating the adverse effects of rising building material costs on property development.

1.4       Research Question

The following research questions will guide this study:

1. What are the main factors contributing to the rising cost of building materials in Enugu?
2. How do the increasing costs of building materials affect property development activities in Enugu?
3. What are the implications of rising building material costs on housing affordability and quality in Enugu?
4. What strategies can be implemented to mitigate the effects of rising building material costs on property development in Enugu?

1.5       Significance Of The Study

This study is significant because it addresses the critical issue of rising building material costs and their impact on property development in Enugu, Nigeria. Understanding this issue is crucial for various stakeholders, including property developers, policymakers, and potential homeowners, as it directly affects the feasibility of construction projects, housing affordability, and the overall quality of life in the city.

For property developers, the findings of this study will provide valuable insights into the factors driving the increase in building material costs and how these factors influence project planning and execution. By understanding these dynamics, developers can make more informed decisions regarding budgeting, sourcing materials, and managing risks associated with fluctuating costs. This knowledge could also help developers explore alternative construction methods and materials that could lower costs while maintaining quality.

For policymakers and government agencies, the study will offer an evidence-based analysis of the challenges facing the property development sector due to rising material costs. The study’s recommendations could inform policy formulation and the development of interventions to stabilize material prices, such as promoting local production, improving supply chain efficiency, and providing incentives or subsidies to support developers. This could contribute to achieving broader economic and social goals, including affordable housing and sustainable urban development.

For potential homeowners and the general public, the study highlights the implications of rising building material costs on housing affordability and availability in Enugu. By understanding these effects, stakeholders can better advocate for policies and programs that address the housing needs of the population, particularly for low- and middle-income groups. Additionally, the study will help raise awareness about the importance of using quality materials and adhering to safety standards, thus promoting safer and more sustainable living environments.

Overall, this study aims to contribute to the body of knowledge on property development in Nigeria, particularly in the context of economic challenges posed by rising construction costs. It seeks to provide practical solutions to enhance property development outcomes, support sustainable growth in Enugu, and improve living conditions for its residents.

1.6       Scope And Limitation

This study focuses on examining the effects of the rising cost of building materials on property development in Enugu, Nigeria. The scope is limited to Enugu because it is one of Nigeria’s rapidly growing urban centers, facing significant challenges in property development and housing affordability due to fluctuating construction material prices.

Some obstacles encountered in the course of carrying out this research were as follow:

• Time factor was the major constrain couple with multiplicity of other classroom work and lecture requirement were a set back to the research.
• Un-cooperating attitude of some respondents as they were busy to attend to the researcher.
• In accessibility of adequate information from research respondent due to illiteracy among them, some find it difficult to understand some question they were asked.
• Finance was also a limiting factor in the course of the research.

1.7       Definition Of Operational Terms

Building Materials: These refer to any materials used in the construction of buildings, such as cement, steel, sand, gravel, bricks, roofing sheets, tiles, wood, and other essential components required to complete a building project.

Property Development: This involves the process of purchasing land and constructing or renovating buildings for residential, commercial, or industrial use. It includes activities such as planning, financing, designing, building, and selling or leasing properties.

Housing Affordability: This term refers to the ability of individuals or households to afford the cost of housing without compromising their ability to meet other basic needs. It is often measured by the proportion of income spent on housing expenses.

Cost Inflation: In this context, cost inflation refers to the general increase in the prices of building materials over time, which affects the overall cost of property development. It can result from various factors, including economic conditions, currency fluctuations, and supply chain disruptions.

Supply Chain Disruptions: These are unexpected events or circumstances that interrupt the normal flow of goods and materials in the supply chain. In the context of this study, supply chain disruptions may affect the availability and prices of building materials.

Foreign Exchange Rate: The value of one currency for the purpose of conversion to another. In Nigeria, fluctuations in the foreign exchange rate can significantly impact the cost of imported building materials, thus affecting overall construction costs.

Urban Development: This refers to the growth and expansion of urban areas through construction activities, including residential, commercial, and infrastructural projects. It involves planning and building in a way that accommodates population growth and economic development.

Substandard Building Materials: These are materials that do not meet the established quality or safety standards required for construction. The use of such materials can compromise the structural integrity and safety of buildings.

Mitigation Strategies: These are actions or measures proposed to reduce or minimize the adverse effects of rising building material costs on property development. They may include policy interventions, alternative construction methods, or sourcing locally produced materials.

Stakeholders: In the context of this study, stakeholders refer to all parties involved in or affected by property development activities. This includes property developers, government agencies, policymakers, financial institutions, potential homeowners, and the general public.

1.8       Historical Background Of The Study

Enugu, located in southeastern Nigeria, has a rich history that has significantly influenced its current urban and property development landscape. Originally known as a coal mining town, Enugu became a central hub in Nigeria’s coal industry during the early 20th century. The discovery of coal in the region in 1909 and the subsequent development of mining infrastructure led to rapid growth and urbanization, establishing Enugu as a key industrial and economic center in Nigeria (Onyema, 2021).

Following Nigeria’s independence in 1960, Enugu experienced significant economic and infrastructural development as part of the broader national effort to modernize and expand urban areas. The city benefitted from investment in public infrastructure, including roads, schools, and hospitals, which spurred residential and commercial property development (Mba, 2023). However, the economic challenges of the 1980s and 1990s, including economic recessions and political instability, impacted the pace of development and led to periods of stagnation in the construction sector.

In the early 2000s, Enugu saw a revival in property development, driven by both local and regional economic growth. The city’s status as the capital of Enugu State and its role as a commercial and educational hub contributed to increased demand for residential, commercial, and industrial properties (Chukwuemeka & Nweke, 2021). During this period, Enugu’s property market experienced growth, with numerous development projects aimed at addressing the housing needs of its growing population.

However, in recent years, the rising cost of building materials has posed a significant challenge to property development in Enugu. Factors such as inflation, currency devaluation, and global supply chain disruptions have led to increased prices for essential construction materials, impacting the feasibility and cost of new projects (Eze & Okonkwo, 2023). Additionally, Enugu’s infrastructure development has been affected by these cost pressures, contributing to delays in project completions and higher housing costs, which in turn affect the affordability and quality of housing available to residents.

The historical context of Enugu’s development provides a backdrop for understanding the current challenges faced by the property development sector. This study aims to explore how historical trends and economic factors have shaped the present state of property development in Enugu and to provide insights into strategies for addressing the impact of rising building material costs.