When it comes to the real estate sector in Nigeria, there is no doubt that the sector has grown and will continue to grow even more in the coming years. The real estate sector is one of the most lucrative sectors in the country and it is set to continue growing as more people acquire property and thus increase demand for housing units.
Real estate in Nigeria is slowly getting to where it was before the recession of 2014. This is partly because investors are now looking at stable income as opposed to high yields.
Also, the increase in the number of people with disposable income is now translating into real estate investment. The sector has now gained recognition as one of the most profitable investment avenues in the country.
Investors are now looking at ways to invest in this sector so as to capitalize on its returns. But there are also risks involved. This article looks at some of these risks and how you can avoid them so as to make your investment more rewarding.
Real Estate Trends In Nigeria 2023: What Investors Need to Know
The current real estate trends in Nigeria will be an important guide for investors who want to venture into this sector.
Housing prices have gained strength over the last couple of years, particularly during the COVID-19 epidemic. Prices for homes rose, buyer demand surged while mortgage rates reached record lows. In the end, housing was one of the positives during a difficult period.
In this article, we focus on two main topics: 1) the future forecast for real estate in Nigeria for 2022 and 2) some reasons why Nigerians should consider investing in this space. We hope you’ll find this article useful.
1. Dollar To Naira Exchange Rates
The Naira to dollar exchange rates has been a major challenge for almost all Nigerian real estate investors.
The recent devaluation of the naira against the dollar has had a negative impact on the profitability of a number of real estate investments that were made in dollar-denominated properties at a time when the dollar was relatively cheaper.
The devaluation of the Naira against the dollar has not only affected foreign investors, but also indigenous Nigerian investors who have invested in real estate projects in the country.
The depreciation of the naira may make you wonder why you would invest in real estate properties or any other investment, yet it is an investment that could give you excellent returns if done right. It is because, with this kind of instability, where else can you find better returns? The reason for this is that it affects the cost of rent, mortgages, and property prices.
2. Interest Rates
Interest rates are important on an individual level, too. If you’re buying a home, mortgage interest rates play a big role in the affordability of your monthly mortgage payments.
If you’re a homeowner looking to refinance, they’ll have a direct impact on your ability to lower your payments. And if you’re in the market to buy or sell a home, knowing what interest rates are doing can help you make more strategic decisions about when is the right time to pull the trigger.
3. Rent Is 78% Higher Than Buy Demand
In a recent article in Business Day, a property consultant noted that rents have been increasing by about 10 percent annually. That’s a massive increase in a country where annual inflation averages less than half of 1 percent.
The prices of houses and apartments are also rising quickly. In Ibadan, Lagos, and Port Harcourt, the rise has been between 7 and 9 percent over the past two years.
What will happen to rents and property prices in 2023? They will continue to rise, but not as fast. Why? Because this is Nigeria: we always underestimate how much worse it can get.
The 10 percent figure for rent increases is an average: some areas will do worse and some better. But even if we see rent increases of 20 percent or more, we should remember that they could go much higher.
4. Housing Inventory
The housing inventory — also known as the number of houses that are available for purchase is an additional factor that affects the market for housing, too. If an inventory is scarce with demand high, it can create a seller’s market. The prices of homes rise and bidding wars break out, and sellers hold an advantage in negotiations.
If the inventory is high, in contrast, buyers will benefit. In a buyer’s market, there are more listings for sale than buyers who want to buy them. This can slow price increases and reduce competition in general.
In terms of the current inventory is concerned, the supply is extremely low in recent times and the outbreak of coronavirus just made matters worse. Sellers have been wary about the presence of strangers in their homes and the uncertainty of the economy the number of available listings dropped in 2020, eventually hitting the lowest levels ever recorded.
The listings have since improved slightly but are still quite low. There is a chance that vaccinations in mass quantities will assist in loosening supply and bringing sellers back to the market. But, obviously, it’s only time to see.