In this edition, you will get the highlight of major events that have taken place in the Nigerian real estate market spanning the second half of 2023.
So strap in, get your popcorn, and let’s get into this exciting edition of REMNs – Nigerian Real Estate: X Files.
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As the second quarter of 2023 unfolded, the Nigerian real estate sector continued to navigate a landscape marked by both challenges and opportunities. This critical period was characterized by various events that significantly influenced the industry, shaping its trajectory for the remainder of the year. Here are some major events that took place in the Nigerian real estate sector during the second half of 2023:
The real estate market contributes 5.29% to Nigeria’s GDP in the second quarter of 2023
The real estate market in Nigeria grew by 1.87% in the second quarter of 2023 according to NBS. However, this growth was slower than the growth rate of 2.58% recorded in the same quarter of 2022. The slower growth was due to a number of factors, including the economic crisis, declining occupancy rates, and increased competition from the construction sector.
Despite the slower growth, the real estate market still contributed 5.29% to Nigeria’s GDP in the second quarter of 2023. This means that the real estate sector is still a major driver of economic growth in Nigeria.
The construction sector also grew in the second quarter of 2023, by 41.27% year-on-year. This growth was driven by increased government spending on infrastructure projects. However, the construction sector’s growth was slower than the growth rate of 46.3% recorded in the same quarter of 2022.
Overall, the performance of the real estate and construction sectors in Nigeria in the second quarter of 2023 was mixed. The real estate market grew at a slower pace, while the construction sector grew at a faster pace. However, both sectors still contributed significantly to Nigeria’s GDP growth.
Aftermath of Fuel Subsidy Removal
The fuel subsidy removal is a major challenge for the real estate sector in Nigeria, The sharp rise in the price of fuel has pushed up the cost of construction materials. This has led to increased construction costs which has made it more expensive to build new homes and apartments. The higher cost of living has made it more difficult for Nigerians to afford housing.
Affordable Housing Initiatives
Affordable housing remained a central concern during the quarter. Both public and private stakeholders collaborated to launch initiatives aimed at providing housing solutions to low and middle-income individuals. These efforts were propelled by a recognition of the housing shortage in urban areas and the need to address the issue urgently.
Land Prices Soar
With high levels of inflation and a depreciating currency, smart investors are now choosing land as a more secure form of investment in real estate as a hedge against inflation.
Land prices in Nigeria continued to rise in the second quarter of 2023, with Lagos, Abuja, Rivers, and Oyo recording high price growth.
In Lagos, land prices increased by an average of 23% year-over-year, driven by strong demand from investors and developers. The high demand for land in Lagos is due to a number of factors, including the city’s growing population, its status as a significant economic hub, and its limited availability of land.
Abuja, the nation’s capital, also saw significant land price growth in the second quarter, with prices increasing by an average of 20% year-over-year. The high demand for land in Abuja is due to its status as the seat of government, its rapidly growing population, and its strategic location.
Rivers and Oyo are two other states that saw strong land price growth in the second quarter. In Rivers, prices increased by an average of 18% year-over-year, while in Oyo, prices increased by an average of 15% year-over-year. The high demand for land in Rivers and Oyo is due to their economic potential, their strategic locations, and their growing populations.
Rise of Proptech
The second quarter marked a significant acceleration in the adoption of property technology (proptech) solutions. Real estate companies embraced digital tools for land purchase, financing, property listings, virtual property tours, and online transactions. This shift not only enhanced convenience for buyers and sellers but also showcased the industry’s readiness to embrace innovative approaches, while opening up the market to a wider pool of investors.
Highlights
Here are some additional details about the factors that affected the real estate market in the second half of 2023:
- Economic crisis: The economic crisis in Nigeria has led to a decline in disposable income among many Nigerians. This has reduced demand for real estate, as people have less money to spend on housing.
- Declining occupancy rates: The occupancy rates of commercial real estate properties have declined in recent months. This is due to a number of factors, including the economic crisis and the rise of remote work.
- Increased competition in the construction sector: The construction sector has grown rapidly in recent years. This has led to increased competition for real estate projects, which has put downward pressure on prices.
Despite the challenges facing the real estate market, there are still some positive signs. The government is investing heavily in infrastructure, which is creating demand for real estate in some areas. Additionally, the population of Nigeria is growing rapidly, which is putting upward pressure on demand for housing.
In summary
The outlook for the real estate market in Nigeria is mixed. There are some challenges that need to be addressed, but there are also some positive signs. The market is expected to remain volatile in the near term, but it is likely to continue to grow in the long term.
Moses Oyong is a luxury real estate advisor with a passion for arts and culture, music, fashion, and all things luxurious. With a keen eye for beauty and attention to detail. I strive to help my clients find their dream homes that reflect their unique sense of style and taste whilst providing them with the right information to ease the stress of the decision-making process.
