The housing market in Nigeria continues to decline as the country struggles out of recession coupled with high interest rates, high inflation rate, rising unemployment, agitation in some parts of the country and the ongoing insurgencies. Demand has fallen sharply and prices continue to drop, especially in real terms.
In Lagos Island, house prices fell by 5.58% in 2016, after an annual decline of 25% in 2015 and year over year (y-o-y) rises of 4.62% in 2014, 11.14% in 2013, 4.62% in 2012, and 28.87% in 2011. When fitted for inflation, house prices in Lagos Island dropped by a dramatic 18.17% during 2016.
On the Mainland, average house prices increased by a modest 2.33% in 2016, a slit slowdown from y-o-y growth of 20% the previous year, according to Residential Auctions Company (RAC). However due to high inflation, this translates, in real terms, into house prices dropping 11.3% y-o-y in 2016.
Lagos remains the most expensive city in Africa in 2016, according to real estate firm Savills, despite falling house prices and rents.
Average price of four-five bedroom houses in Lagos Mainland was NGN 75.51 million (US$239,900) in 2016, while similar properties in the Lagos Island cost around NGN 172.21 million (US$547,150), according to RAC.
The house price index in Lagos Island represents the high end market in Nigeria. On the other hand, Lagos Mainland’s house price index represents price movements in the mainstream market.
In most cities in Nigeria, demands for houses keep falling. Emeka Eleh, the former president of Nigerian Institute of Estate surveyors and valuers said: “It now takes a longer time to conclude transactions, while in some cases, there are renegotiations on rents.”He went further to state that while the impact of the economic recession varies from city to city, high end properties, such as in Ikoyi, are the worst hit.
Land transactions in Lagos also dropped 30% in 2016 from a year earlier, despite cuts in various land transaction related rates. In 2015, consent fees were reduced from 6% to 1.5% while the capital gains tax rate was cut from 2% to 0.5%, in an effort to spur property demand.
Similar decline in house is expected to continue in 2017 in most cities, and then improve towards the ending of 2017 or early 2018, beginning with Lagos.
According to Rotimi Akinlose managing director of REC.“The possibility that house prices will continue to fall in most cities this year is very high.”“However, Lagos being the economic and financial base of the country will start to see house prices rise again across the board”.
The economy was estimated to have contracted by around 1.7% in 2016, after expanding by 2.7% in 2015, 6.3% in 2014, 5.4% in 2013, 4.3% in 2012, and 4.9% in 2011. It however saw a positive growth of 0.08% in 2017 which is a good sign that the economy is stepping out of recession and International Monetary Fund (IMF), projecting the Nigeria’s economy to grow at a faster pace than South Africa’s in 2018. According to its World Economic Outlook, South Africa’s economy is expected to grow at 1.2% while Nigeria’s is expected to grow at 1.9%.