Real estate prices in Nigeria grow steadily

After a boom period marked by high oil prices and double-digit growth, Nigeria’s real estate sector was significantly impacted by the country’s economic downturn, with growth dropping off in 2015 and 2016, and remaining subdued in 2017 and early 2018. With some high-end office and residential projects stalled, developers are increasingly turning their attention towards smaller and more affordable projects, which should benefit from ongoing government efforts to grow the country’s mortgage market and reduce its housing deficit. Planned fundraising activities at the Nigeria Mortgage Refinance Company (NMRC) should help support commercial bank lending, while the federal government’s plans to restructure and recapitalise the Federal Mortgage Bank of Nigeria (FMBN) should also see home ownership expand significantly in coming years. These efforts should keep the sector on a slower but more stable growth trajectory in 2018. At the same time, prevailing macroeconomic conditions continue to offer a silver lining to residential and office tenants, with landlords lowering their rental rates and offering new incentives to attract and retain tenants.

Recent Performance

Nigeria’s real estate trajectory has risen and fallen with international oil markets. Local consultancy Estate Intel cited data from the National Bureau of Statistics (NBS), showing that in nominal terms, real estate GDP growth rose from 15.1% in the first quarter of 2013, peaking at 24.14% in the second quarter of 2013, with full-year real GDP growth hitting 20.49% in 2013. As Brent crude prices peaked at $115 per barrel and then began to slide in mid-2014, real estate growth was also checked, falling from 22.34% in nominal terms in the first quarter of 2014 to 10% in the second quarter of 2014, with full-year growth hitting 12.5% in 2014. Nominal growth fell to 9.18% in the third quarter of 2015 and to 8.27% in the last three months of 2015, with full-year growth standing at 9.52% in 2015, before dropping sharply to 0.61% in the first quarter of 2016, as the price of Brent crude sunk to less than $30 per barrel. Nominal growth averaged 1.76% in the first nine months of 2016.


In real terms, the sector’s growth trajectory has shown a steeper decline, falling from a peak of 15.86% in the second quarter of 2013, and ending the year with growth of 11.98%. Real sector growth fell to 5.12% in 2014 and 2.11% in 2015, according to Estate Intel, before contracting by 4.69%, 5.27%, and 7.37% in the first, second and third quarters of 2016, respectively. Real estate consultancy MCORE reports that the real estate services sector contracted by 8.38% in nominal terms in the first quarter of 2018, 18.94% less than the growth rate in the first quarter of 2017, and 5.03% lower than in the final quarter of 2017. The bureau reports that real estate’s contribution to GDP in nominal terms was 5.87% in the first quarter of 2018, against 7.67% in the fourth quarter of 2017. In real terms, the sector contracted by 9.4% in the first quarter of 2018, a 3.48% decline from the fourth quarter of 2017. The sector contributed 5.63% to real GDP growth in the first quarter of 2018, against 6.34% in the first quarter of 2017 and 7.03% in the fourth quarter of 2017.

Residential Rental

In its Nigeria Real Estate Market Outlook 2018 report, local property company Northcourt Real Estate said that the 2012-14 boom period had brought residential real estate prices to “perhaps irrational” levels, with the 2016 recession offering a necessary market correction, with prices, yields and other performance indicators corrected in 2017. Residential vacancy rates in Lagos averaged 11% in 2017, down from 15.57% in the first half of 2017, and 32.87% at the end of 2016. Vacancy rates in Abuja averaged 7% in 2017, down from 9.5% in the first half of 2017 and 25.57% at the end of 2016. The firm also reports that developers are resuming work on developments that stalled during the recession, while residential supply in the Ikeja Government Reserved Area (GRA) began to decline, in part because some units were converted into office spaces, while others were sold or leased. Landowners are increasingly forming joint ventures with developers in an effort to maximise their property value.

Office Market

The office rental market has not recovered at the same pace as its residential counterpart, with MCORE reporting that Lagos’ commercial office market’s occupancy rate remained low in the first quarter of 2018, averaging around 50% as a result of oversupply and weak economic growth. “While enquiries from prospective office tenants have increased since the beginning of 2018, the high vacancy levels resulting from the recession have prevented rental increases, MCORE reports that demand pressures will nonetheless be neutralised by new spaces in the market in 2018 and 2019, including the Kingsway Tower, with 13,317 sq metres of gross leasable area (GLA); Alliance Place, with 6670 sq metres of GLA; Madina Tower, with 8300 sq metres of GLA; and Cornerstone Tower, with 12,000 sq metres of GLA.

Total supply is forecast to increase by 64,000 sq metres, or 12% of existing stock before 2020, according to MCORE. Rental prices for grade-A office space has by 20% since 2015 to average $750 per sq metre, while rent for grade-B offices averaged $400 per sq metre in the first quarter of 2018.

Meanwhile, Northcourt Real Estate reports that the office market recorded significantly more activity in 2017, despite delays to major projects including Eko Tower II and Desiderata, with rent for grade-A office space ranging between $500 and $800 per sq metre, against a price point of around $1000 per sq metre in 2015 and 2016. As with the residential and retail sectors, office landlords have also offered incentives to tenants including rent-free periods, flexible lease payments, fit outs and soft furnishing, oversupply remains a challenge.

Residential Sales

Lagos-based real estate research company Residential Auctions Company (RAC) reported that Lagos’ housing market has begun to show signs of economic recovery. According to the company, the Lagos Island market was hit hardest by the recession, with prices contracting by 24.77% in 2015 and 5.58% in 2016. In 2017 the average asking price of a four- or five-bedroom single family unit on Lagos Island rose by 13.84%, reaching N196.1m ($634,000), up from N172.2m ($557,000) in 2016, which the RAC attributed to the effect of the weakening of the naira, on new house prices across Ikoyi, Victoria Island and Lekki Phase 1. Prices climbed most steeply in Victoria Island, rising by 30% in 2017, with the RAC attributing this to unoccupied secondary homes on major streets, as well as ongoing development at the Eko Atlantic project. The project’s 15-storey Afren Tower received its first tenant in August 2017.

The RAC reports that unlike Lagos Island, the Lagos mainland market continued to grow despite the recession, with asking prices rising by 20.43% and 2.33% in 2015 and 2016, respectively. This trend slowed in 2017, with asking prices for houses growing by just 0.53%, hitting N75.9m ($245,000), against N75.5m ($244,000) in 2016. The RAC reports that new supply has been significantly lower on the mainland than Lagos Island, with the areas of Anthony Village and Gbagada recording the highest growth in asking prices, rising by 29.4% and 24.09%, respectively, as supply shrank throughout 2017. In contrast, prices in Ilupeju and Omole Phase 1 fell by 18.8% and 14.01%, respectively, in 2017 as supply rose.

Mortgage Market

Mortgage penetration is rising rapidly in Nigeria, but there is plenty of room for growth. In February 2018, the Mortgage Banking Association of Nigeria (MBAN) reported that Nigeria’s mortgage finance market grew by 82% between 2010 and 2016, hitting N518.8bn ($1.7bn) in 2016, against N348.1bn ($1.1bn) in 2012 and N28.4 ($91.9m) in 2010. According to MBAN data, there were fewer than 100,000 mortgage transactions recorded in Nigeria between 1960 and 2009, with mortgage growth accelerating rapidly to total 181,519 transactions between 2010 and 2016. At the same time, mortgage penetration remains comparatively low, with MBAN reporting that Nigeria’s mortgage debt-to-GDP ratio is less than 1%, while less than 5% of 13.7m registered housing units have been financed with mortgages. The association attributes this to land acquisition challenges, including a dearth of titled properties, as well as relatively high levels of non-performing loans in the mortgage segment. The Nigeria Deposit Insurance Corporation reports that 55% of the country’s N94bn ($303.9m) loan portfolio was considered non-performing in 2017. This has pushed commercial mortgage lending rates to average between 20% and 24%, according to the MBAN. Bloomberg echoed these statements in June 2018, reporting that land acquisition challenges, poverty and high commercial bank lending rates have constrained mortgage market growth, with the firm saying there were just 50,000 registered mortgages in the country.


Although the sector has been affected by the recession, real estate is set to stabilise in 2018 as markets absorb new supply, and macroeconomic indicators improve. The 2018 budget boosted public spending by 16% from 2017 levels, with a significant portion of funding channelled into new projects under the Federal Ministry of Power, Works and Housing, as well as the Federal Ministry of Transportation. GDP growth is forecast to hit between 2.1% and 3.5% in 2018, which should support further real estate stabilisation, while population and urbanisation trends are expected to sustain steady mid- and long-term industry expansion.

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