By: Gbenga Ibitoye
There is this latest trend of clampdown on real estate companies about overpriced properties and exorbitant rent by landlords in Nigeria, especially in Lagos and Abuja. This narrative, I believe, is becoming increasingly popular due to ignorance of the general public and lack of proper awareness about the factors that drive property value and pricing in Nigeria. Which is why this article will examine a few of the factors that determine property prices in major cities in Nigeria like Lagos and Abuja.
For context, “a certain Richard feels it’s unfair and unjustifiable to pay $300,000 to buy a 3-bedroom duplex in Lekki, because according to him, there is another property of the same quality and features in Cape town that is listed for $200,000. Why the price disparity? Properties in Lagos are overpriced! He exclaimed.”
The Nigerian real estate market is such a dynamic one, shaped by myriad factors. These ranges from economic indicators such as unstable exchange rates, inflation and interest rates to market dynamics; supply and demand, infrastructural developments, and lastly, local market sentiment such as neighborhood desirability. The knowledge of these factors will help homebuyers, investors, and the general public make informed decisions while navigating the dynamic real estate market in Nigeria.
In recent times, the impact of economic factors such as unstable exchange rate, inflation, and interest rates has not been favorable to developers. This has a direct impact on the cost of building materials, which are mostly imported. For example, a developer quotes N2 billion for the construction of 10 units of 2-bedroom duplex in January 2023 when the exchange rate was $1 /N745 with the project completion date of December 2024. By December 2024, the exchange rate was at $1/N1,500 – that’s over 100% increase in cost of building. This, in turn, affects the price of the property. In fact, as a result of this unstable phenomenon in exchange rate, some developers with projects under construction in prime locations in Lagos and Abuja currently price their properties in USD just to hedge against the exchange rate fluctuation.
The interplay between supply and demand dynamics is also a major factor affecting property prices in cities like Lagos and Abuja. And while some may argue that the price of properties in Lagos when compared to other major cities in Africa (e.g., Johannesburg, Kigali, Cape Town) that are supposedly better in terms of economic activities and infrastructure development is unreasonably high and extortionate – the truth is, the population growth in Lagos outpaces housing supply. Think about it; the smallest state in Nigeria by landmass has an estimated population of about 22 million people with housing deficit well over 5 million per reports on one of the national dailies in Nigeria – definitely, high demand for properties against limited supply (scarcity) will drive rental prices and cost of owning properties higher.
Other factors like local market sentiments, such as location desirability by the high and mighty, also play a crucial role in pricing. Places like Ikoyi and Banana Island are affluent neighborhoods for wealthy people in Lagos, which guarantees a certain level of prestige and exclusivity. Which also explains the high rental prices and expensive cost of properties. For example, the Bourdillon road in Ikoyi is considered the most expensive street in Nigeria. It is also home to Nigeria’s powerful and wealthiest elite like President Bola Tinubu whose house is referred to as the Lion of Bourdillon – of course, renting or owning a property in such neighborhood will cost a fortune.
Lastly, while it’s true that the Nigeria’s real estate market has its own challenges, it also offers tremendous opportunities for growth and returns on investment. For Nigerians at home and in the diaspora, investing in Nigeria’s real estate market can be profitable and strategic move providing diversification options. By understanding the underlying dynamics of the market and taking a long-term view, investors can unlock the potential of Nigeria’s real estate market and contribute to the country’s economic development.
GBENGA IBITOYE is the Co-founder and Director of Business Development at RIPARO NIGERIA LIMITED
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