The Soaring Challenges of Nigeria’s Housing Market: A 40% Spike in Costs and Pressures on Affordability
The housing market in Nigeria has experienced a significant increase of about 40% in lease and sale costs during the first half of 2023. This surge is attributed to factors like inflation, rising interest rates, and a decline in new investments. Major cities including Lagos, Abuja, Enugu, Port Harcourt, and Kano have seen a rise in residential property prices, making them less accessible to many.
The Monetary Policy Rate (interest rate) has climbed to 18.75%, up from 16.5% at the beginning of the year, causing a 12% increase in the cost of capital within six months. This has discouraged borrowing and reduced money circulation in Nigeria’s economy, particularly affecting the real estate and construction sector. Construction costs have risen, leading to delays in real estate supply and further pressure on property prices.
Prices of construction materials like cement, blocks, paints, reinforcement, and more have seen significant increases, impacting the overall cost of construction. Rentals have remained resilient in core city centers, driven by diaspora spending and focus on off-plan properties. However, property experts have observed variations in price increases across different property classes and locations nationwide.
In specific areas like Lagos, rent increases have affected both new and old buildings, influencing the entire market. The uncertainty in the market, coupled with the high cost of goods, has led stakeholders to adopt a wait-and-hold strategy, slowing down capital-intensive projects. Land transactions have remained frequent, driven by residential development and stable demand.
Looking ahead, stakeholders expect demand and supply to continue increasing, leading to a rise in land prices. The real estate market anticipates an upsurge in activities and transactions in the latter part of the year. However, challenges such as increased house rents, inflation, and the removal of subsidies may impact housing development and supply in the short to medium term.
