BusinessDay Media Limited, publisher of Nigeria’s daily business newspaper, along with the Nigerian Mortgage Refinance Company (NMRC) and Lekki Gardens Estates Limited, has given strong backing to the presentation and launch of the Roland Igbinoba House Price Index (RI Index), the first of its kind in Nigeria.
The launch, already slated for today, will hold at BusinessDay Events Centre (The Amphitheatre) at the company’s head office – The Brook, 6, Point Road, Apapa GRA, Lagos.
The RI Index is a painstaking attempt by the Roland Igbinoba Real Foundation for Housing and Urban Development (RIRFHUD) to mirror the housing market, believing that, in a market system, the price index could reflect both its relative costs of production and relative utilities to purchasers, whether the latter intended to use them for residential or commercial purposes.
As a tool, the House Price Index (HPI) measures changes in single-family home prices across designated markets. It reflects areas where some values are increasing or decreasing. Hence, for individuals, HPI can provide necessary information to make decision of when to purchase a house, where and even what type of house to buy. Economists and financial analysts also use House Price Indices to monitor long-term trends in house indices.
The RI Index, according to RIRFHUD, is a variant of the weighted average or median method, and the approach adopted in calculating the RI Index is that of the Laspeyres Index.
“A Laspeyres house price index calculates the weighted average change in prices over a period for fixed type of houses drawn from some base period. It compares the total cost of purchasing a specific type of house in the base period with the total cost of purchasing the same type in other periods.
“An index of these costs is then constructed, taking the quantity of each house listed for sale in the base period as weight,” Roland Igbinoba, executive vice chairman of RIRFHUD, explained.
The index helps to reflect both the relative costs of production and the relative utilities to purchasers. It measures changes in single-family home prices across Lagos and Abuja for now, just as it reflects areas where home values are increasing or decreasing.
For individuals, the RI Index can provide necessary information to make decision of when to purchase a house, where and even what type of house to buy. It can also help developers to know and gauge market affordability in different locations across the cities where the Index is currently covered.
“For the RI Index, we adopt a stratification approach to deal with the issue of changes in the composition of houses sold every quarter. Houses are stratified into 3 bedrooms, 4 bedrooms and 5 bedrooms; other types of houses with more than 5 bedrooms or less than 3 bedrooms are not considered in this report. Due to lack of data sources in the country (which we are now starting to build), the prices of houses listed for sale every month are collected from different sources”, He said.
Continuing, he said, “the median price of house in each stratum every month is obtained; the average of the three median prices per quarter is also obtained and this average of median price is then used as the average price of houses in each stratum”.
He recalled that, in 2016, the Nigerian economy suffered one of its worst recessions in recent history, point out that this reduction in the nation’s revenue and foreign exchange resulted in the decline of the value of naira against other currencies on the foreign exchange market.
“The real estate market was not excluded from the brunt of the recession, which made the cost of building materials increase sharply. For example, the cost of cement rose by 40 percent within 2016. The RI Index in its analysis helps to analyse how all of these variables affect house price movements in the market,” he assured.
