Nigeria’s housing market has experienced a sharp increase of about 40% in the cost of leases and sales in the first half of 2023. This rise in costs is attributed to factors such as inflation, rising interest rates, and a decline in new investments. Major cities like Lagos, Abuja, Enugu, Port Harcourt, and Kano have been affected, making residential properties more expensive and less accessible for many.
The increase in the Monetary Policy Rate (interest rate) to 18.75% from 16.5% at the beginning of the year has contributed to higher borrowing costs, discouraging borrowing and reducing money circulation in Nigeria’s economy. This has led to a delay in real estate supply, exacerbating the pressure on property prices.
The cost of construction materials has also risen significantly, with prices of items like cement, blocks, rings, paints, reinforcement, and sanitary fittings increasing by over 70%. Despite these challenges, rentals in core city centers have remained resilient, and sales have been relatively stable, driven by diaspora spending and off-plan property focus.
Experts note that the real estate market’s uncertainty, coupled with rising costs of goods, has led to a slowdown in real estate activities. The sustained inflation growth and reduced purchasing power have led landlords to justify rental price hikes and take advantage of increased demand.
However, some parts of the housing market, especially high-end properties, have remained strong due to buyers’ resources and demand from the diaspora. The uncertainty caused by elections and naira fluctuations has impacted investor confidence and slowed down real estate activities, making the second half of the year uncertain.
Opinion: The rising costs in Nigeria’s housing market, driven by inflation, interest rate hikes, and supply chain disruptions, pose challenges for both potential homeowners and the overall economy. The government should consider policy interventions to ensure affordable housing options for citizens and promote a sustainable real estate sector. Addressing issues related to materials cost, construction financing, and regulatory frameworks could help stabilize the housing market and contribute to economic growth.