News summary:

• A 23% increase in real estate value has attracted investors, with land outpacing other assets in terms of price appreciation.
• Factors such as high inflation, fluctuating exchange rates, and increased demand for gated estates in high-growth regions have contributed to this growth.
• Despite rising costs and challenges, real estate markets in Lagos, Abuja, Rivers, and Oyo have expanded, with millennials and young professionals driving transactions.

Land dominated the real Estate market in 2022 in terms of price appreciation, as it outpaced other property assets placed on the market. Its value increased by 22.88 percent, outpacing residential and short-let assets, whose values increased by 18.13 percent and 19.05 percent, respectively.

According to a survey conducted by BuyLetLive, an online property research company, the three assets demonstrated resiliency during the period, growing by those figures despite inflationary pressures and other market challenges.

According to experts, the price increase was to be expected in a nation that experienced high inflationary pressure throughout the entirety of the previous year, beginning with 15.60 percent in January and rising to 21.34 percent in December, which represented a 5.74 percentage point increase during the period.

According to them, the highest rate of inflation was documented in November, at 21.47 percent, a difference of 5.87 percentage points compared to the previous eleven months. The regime of fluctuating exchange rates was a further contributor to the rate of price growth.

The parallel market exchange rate, which began the year at N564 per $1, was greater than N872 per $1 in October 2022.

In an effort to curtail inflation in the country, the Monetary Policy Committee of the Central Bank of Nigeria raised the monetary policy rate from 11.5 percent to 16.5 percent at the end of last year.

All of these factors, according to the experts, exerted pressure on commodity prices, including those of building materials, labour, and other components of the supply of real estate assets.

On the other hand, more people have realised that real estate, particularly in high-growth regions like Lagos, is one of the safest investment channels, while security has become a major concern for Lagos residents and is therefore a major factor fueling demand for gated estates throughout the city.

While millennials headed the list of demand drivers for the rental market in Lagos, high-net-worth individuals, expatriates, and diplomats dominated the prime residential market.

Among other factors, land in Lagos is scarce and in high demand. With an estimated 20 million inhabitants, the city is only 3,577 square kilometres, or 358,862 hectares, in size, representing only 0.4% of Nigeria’s 923,773 square kilometres of territory.

Commenting on the expansion, Temitope Runsewe, CEO of Dutum Construction, stated that the Nigerian real Estate Market expanded significantly in terms of completed projects in 2022.

During the course of the year, new asset classes have emerged, and investment in the sector has increased. “However, the limiting effects of rising inflation and the rising cost of construction materials have remained a significant hindrance, particularly for developers,” he added.

In three additional locations surveyed, including Abuja, Rivers, and Oyo, land has the highest rate of price increase. In Abuja, the second-largest real estate market in Nigeria, land prices increased by 22.81 percent over the past year, while residential and short-let flat prices increased by 16.52 percent and 19.50 percent, respectively.

Abuja’s real estate market performed similarly to that of Lagos during the period under review. Martin Uche, the head of research at BuyLetLive, told BusinessDay that the currency crisis, the price of construction materials, and excessive price speculation prompted developers to raise prices.

“Millennials and baby boomers are driving transactions; young professionals and young families account for nearly 80 percent of rental transactions in Abuja, according to data that we’re tracking,” he said, noting that Guzape, Maitama, Asokoro, and Katape Extension are the top investment destinations due to their infrastructure and access.

Oyo State also saw significant increases in land and other asset prices. The residential, land, and short-let markets in the state grew by 10.38 percent, 13.59 percent, and 11.87 percent, respectively, over the past year.

The survey notes that in recent years, the state’s proximity to Lagos and the completion of the Lagos-Ibadan Railway project have positioned its real estate market for growth, adding that regions such as Bodija, one of the city’s most prime locations, and Moniya, where the railway station is located, are poised for expansion.

The modest improvement in infrastructure development in these areas has also contributed to the price increase. Uche stated, “Infrastructure not only affects real estate market performance but is also the greatest value driver across all real estate asset classes.”

He noted, however, that despite this modest improvement, investment in Nigeria’s infrastructure over the past decade has remained relatively low relative to the annual budget (less than 9 percent on average) and the gross domestic product (less than 1 percent on average).

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