The Nigerian real estate and property market has been on an upward trajectory for several years, with property prices continuing to rise despite economic fluctuations.
From bustling urban centers like Lagos and Abuja to emerging metropolitan areas like Port Harcourt and Kano, the real estate market shows no signs of slowing down. Several factors contribute to this trend, ranging from economic and demographic shifts to policy and infrastructural challenges.
This article delves into the primary reasons for the continuous increase in property prices in Nigeria.
1. Population Growth and Urbanization
One of the most significant drivers of rising property prices in Nigeria is the country’s rapid population growth. With an estimated population of over 220 million and an annual growth rate of about 2.5%, Nigeria is projected to become the third most populous country in the world by 2050. This demographic explosion fuels urban migration as people move to cities in search of better opportunities.
Urban centers such as Lagos, Abuja, and Port Harcourt are experiencing unprecedented population inflows, leading to increased demand for housing. Unfortunately, the supply of residential and commercial properties has not kept pace with this demand, causing prices to skyrocket.
2. Insufficient Housing Supply
The Nigerian housing market faces a significant supply-demand imbalance. According to the Federal Mortgage Bank of Nigeria, the country has a housing deficit of over 20 million units. This shortfall is due to several factors, including high construction costs, limited access to affordable financing, and bureaucratic bottlenecks in land acquisition and property development.
Private developers often focus on luxury and high-end properties to maximize returns, leaving a considerable gap in the affordable housing segment. The scarcity of housing, particularly in prime urban locations, drives up property prices across the board.
3. High Cost of Construction
Construction costs in Nigeria are significantly higher than in many other developing countries. Several factors contribute to this, including the reliance on imported building materials, which are subject to foreign exchange fluctuations. The depreciation of the Naira against major currencies has made imports more expensive, directly impacting the cost of construction.
Additionally, inadequate local manufacturing capacity for essential materials like cement and steel exacerbates the problem. Labor costs have also risen due to inflation and the specialized skills required for modern construction projects, further driving up property prices.
4. Infrastructural Development
While Nigeria’s infrastructure remains underdeveloped in many areas, ongoing improvements in key cities have contributed to the rise in property values. Investments in road networks, bridges, airports, and public utilities enhance the attractiveness of certain locations, making them prime targets for real estate development.
For instance, areas in Lagos such as Lekki and Ajah have seen massive infrastructural upgrades, including the Lekki-Epe Expressway and the ongoing construction of the Lekki Deep Seaport. These developments have increased the desirability of properties in these regions, leading to higher demand and, consequently, higher prices.
5. Land Scarcity and Ownership Issues
Land in urban areas is becoming increasingly scarce, particularly in major cities like Lagos and Abuja. The limited availability of land drives competition among developers, pushing up the cost of land acquisition. Additionally, land ownership in Nigeria is often complicated by issues such as unclear title deeds, multiple claims to the same parcel, and lengthy legal disputes.
The Land Use Act of 1978, which vests ownership of land in the state, has been criticized for creating bureaucratic hurdles in land transactions. These challenges add to the cost of acquiring and developing land, which is ultimately passed on to buyers or renters.
6. Inflation and Economic Instability
Nigeria’s economy is characterized by high inflation rates, which erode the purchasing power of the Naira and increase the cost of living. Inflation also impacts the cost of building materials, labor, and other inputs required for property development. Developers, in turn, adjust their prices to maintain profitability.
Moreover, the country’s economic instability, driven by factors such as fluctuating oil prices and political uncertainties, has led many investors to view real estate as a safe haven. This increased investment demand contributes to higher property prices.
7. Foreign Investment and Diaspora Influence
Nigeria’s real estate market has also attracted significant interest from foreign investors and the Nigerian diaspora. Many Nigerians living abroad see property investment as a way to secure their financial future while contributing to the country’s development. This influx of capital has driven up prices, especially in high-demand areas.
Foreign investors, attracted by Nigeria’s large and growing market, have also played a role in increasing property values. Their investments in luxury apartments, commercial spaces, and mixed-use developments have set new price benchmarks in the market.
8. Speculation and Real Estate as an Investment Vehicle
In Nigeria, real estate is often viewed as a lucrative investment vehicle. Many individuals and corporate entities buy properties not for immediate use but as a store of value or a means of generating rental income. This speculative activity reduces the availability of properties for genuine buyers, further inflating prices.
The continuous rise in property prices in Nigeria is the result of a complex interplay of demographic, economic, and infrastructural factors. While this trend has created opportunities for investors and developers, it has also exacerbated the housing affordability crisis for many Nigerians.
Addressing these challenges will require coordinated efforts from the government, private sector, and financial institutions to increase housing supply, reduce construction costs, and improve access to affordable financing. Until then, the upward trajectory of property prices is likely to persist.