The Nigerian housing market has experienced a significant surge of approximately 40% in both leasing and sales costs during the first half of 2023, as reported by The Guardian. In the backdrop of rising inflation and escalating interest rates, the affordability of residential properties for lease or purchase in major cities like Lagos, Abuja, Enugu, Port Harcourt, and Kano has taken a hit, placing them beyond the reach of many.
While the housing market remains dynamic and demand continues to hold, concerns have arisen about the absence of standardized pricing and effective price control. This lack of regulation provides opportunities for market operators to exploit weaknesses, leading to indiscriminate increases in material costs.
The Monetary Policy Rate (interest rate) has risen from 16.5% at the start of 2023 to 18.75%, marking a 12% increase in the cost of capital over six months. This has discouraged borrowing and reduced money circulation within the Nigerian economy. This elevated interest rate, coupled with inflation, has repercussions on the construction industry, causing delays in real estate supply and exacerbating property price pressures.
The escalating costs of construction materials, particularly cement, blocks, rings, paints, reinforcement, sanitary fittings, sand, roofing sheets, tiles, and granite, which have seen prices surge by over 70%, have further compounded the challenge.
In urban centers, rental prices have remained resilient, with growth observed in affordable and easily accessible neighborhoods. Sales have shown relative stability, primarily driven by diaspora spending and a focus on off-plan properties. New gated neighborhoods have become hotspots for property development, particularly apartments and terraces.
Property experts have recognized similar trends across the country, albeit with varying percentage changes for different property classes. In Lagos, rental increases have affected both new and older buildings. For instance, a mini-flat in Agidingbi, Ikeja, which used to cost N400,000 annually, now commands N600,000. In higher-end areas like Lekki Phase 1, rental costs for one-bedroom flats have risen from N800,000 – N2 million to N1.5 million – N3 million.
Similar trends have been observed in Port Harcourt, Rivers State, where rent prices have surged in areas like Rumuokwuta and GRA Phase 1. In Abuja, rental rates have witnessed significant increases, with 3/4-bedroom terraces in Wuse now demanding N6-7 million, up from N4 million in 2020-2021.
Frank Okosun, CEO of Knight Frank Nigeria, highlighted the role of inflation in driving this surge in housing prices. He mentioned that newly built properties have particularly been impacted by the inflationary pressures.
Overall, rising costs, inflation, and the uncertainty surrounding elections have dampened investor confidence and slowed down real estate activities in major city centers. As the property market navigates these challenges, stakeholders and experts remain hopeful for improved conditions in the second half of the year, spurred by potential government interventions and economic adjustments.
