The Effects Of Rising Cost Of Building Material On Property Development

Project and Seminar Material for Estate Management

The Effects Of Rising Cost Of Building Material On Property Development


Abstract


Over the past 10 years, there has been a dramatic increase in the costs of building materials in Nigeria, and this development threatens the performance of the construction industry. The objective of the study was to assess the implications of the rising cost of building materials in Lagos State Nigeria. The data pertaining to factors affecting and the implication of rising cost of building materials were sourced from the main contractors, builders’ merchants and consultants who are registered with government bodies through questionnaire survey. The data on the prices of building materials were obtained from the archives of the The Nation Newspaper, Lagos QS News Letter, and field survey of builders’ merchants in 2012. The averages of the prices were used in the calculations of price indices and rates of inflation on building materials. The three most rated factors responsible for the rising cost of building materials are the exchange rate of the Nigeria Naira with a Mean Rated Average (MRA) = 4.4; cost of fuel and power supply, MRA = 4.3; and changes in government policies and legislation, MRA = 4.2, while fluctuations in the construction cost with MRA = 2.8; reduced volume of construction output, MRA = 2.52; and risk of project abandonment, MRA = 2.51, were the three most rated implications. The study concluded that the implications could result in a downward effect on the gross domestic product (GDP) in the nation’s economy.

Keywords: building materials, cost, factors, implications, Lagos State


Chapter One


Introduction

1.1 Background Of The Study

The construction industry in Nigeria is upcoming industry; the sector is regarded as a catalyst for growth while its performance serves as an indicator of the nations economy (Akanni et al.,2014). It us supported by the association of construction players, which encompasses developers, contractors, building material and equipment suppliers, manufacturers, financiers, regulators and others in the value chain.

Building material have been playing an important role in the construction industry. They are those materials put together in erecting or constructing structures, no field of engineering is conceivable without their use (Akanni, 2006; Udisen and Akanni, 2010). Building materials contribute immensely to the quality and cost of housing, from what is used in the foundation to the materials for roofing and finishes, while the building material industry us an important contributor to the national economy of any nation as its output governs both the rate and the quality of construction work.

The cost of building materials poses a significant threat to both the construction industry and people aspiring to own houses (Anosike, 2009; Mekson, 2008; Mohammed, 2008; Njoku, 2007). For example a bag of cement is valued at N1350 in 2006 goes as high as N1850 in 2009 (Anosike,2009) depicting about 37% increment; the bag goes as high as N2000 in 2012 during peak season (Field survey 2012). Supporting this view, Jagboro and Owoeye (2004) earlier established that increase in prices of building materials has multiplier effects on the industry while Idoro and Jolaiya (2010) affirmed that many projects were not completed on time due to the cost of materials, which have been on the increase. Besides timely completion, high prices of building materials form a crucial constraint to improving housing conditions in the low income earning countries, Nigeria inclusive (United Nations Center for Human Settlement (UNCHS),1993).


1.2 Statement Of The Problem

Inspire of the past studies on the cost of building materials in Nigerua , little us publicized about the effects of the rise in cost on property development; most literature (Jagboro and Owoeye,2004; Meckson,2008; Njoku,2007; Oladipo and Oni,2012) has concentrated on identifying the causes with little emphasis on the implications, hence, the research seeks to provide information on effects of the rising cost of building material by examining its  Influence On Property Development.


1.3 Objectives Of The Study

The major objective of the study is the effects of rising cost of building materials on property development.


1.4 Research Questions

  1. What are Building Material?
  2. What is property development?
  3. What are the factors that can increase cost of building materials?

1.5 Significance Of The Questions

This study gives a clear insight into the effects of rising cost of building materials on property development. The study also produces results that corroborate the Fo dings of a great deal of the previous work in this field.


1.6 Scope Of The Study

The research focuses on the effect of rising cost of building materials on property development.


Chapter Five


Conclusion And Recommendations

5.1 Conclusion

The identified variables of the factors and implications of the rise in the cost of building materials had been quantitatively analyzed and evaluated. The nature of the cost of material and time was also established to follow a trend, which was explained by the varying degree of coefficients of relationship of cost and time, respectively, and it could be concluded that there is an inflationary trend in the cost of building materials between 2003 and 2012 with an average inflation rate between 5% and 21% during the 10-year period.

The study also concludes that the exchange rate of the Naira, cost of fuel and power supply, and changes in government policies and legislations were the three topmost factors responsible for the rising while fluctuations in the construction cost, reduced volume of construction output, and risk of project abandonment were the three topmost implications.

Inferences drawn from the conclusions on the implications of the rising costs of the building materials are that there is likelihood of a downward effect on the GDP in the nation’s economy and that the expectations of the government policy toward the realization of the program on “housing for all by the year 20/20” are no longer certain.


5.2 Recommendations

It is suggested that government should formulate policy that will play down the agitations on the use of imported building materials by encouraging research in the production of local building materials. Government should also take drastic steps to reduce the cost of production and transportation of goods by ensuring an adequate supply from the power sector and production of petroleum products through the local refineries as against dependency on importation.


The Effects Of Rising Cost Of Building Material On Property Development


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