Property Demand Trends in Nigeria
The real estate market is quite a booming area in Nigeria’s economy. The real estate industry has recorded growth year after year although affected by the economic downturn in 2015 and remaining slow in 2017 and early 2018. This is according to statistics by the Nigerian Mortgage Refinance Company (NMRC).
Even with this slow growth that lasted years, growth still happened. Reports show that the real estate GDP growth rose from 15.1% in the first quarter of 2013 to 24.14% in the second quarter of the same year. This growth was maintained until 2015, where it fell to about 9.18% in 2015. In Lagos for example, the demand for houses fell to less than 24.77% in 2015 and 5.58% in 2016. During this period, low demand resulted in the conversion of housing units into office spaces, as well as an innovation in terms and packages to try to bring back interest into real estate. This further shows that the decrease in demand at the time was only towards homes, seeing a slight increase in the demand for office spaces.
The general decline in the economy in 2015 affected the demands for homes. The decline in the purchase of homes created a buzz around rental demand.. According to the 2018 real estate market outlook report, the boom in demand of real estate and consequently the rise in contribution to GDP didn’t happen until the last quarter of 2017. Between then and 2018, residential vacancy rates in only Lagos increased by about 32.87%, while it increased by 32.87% in Abuja.
The rental demand boom happened in 2015 as a result of the decline in the economy. Demands fell and the demand for rental housing increased significantly. During the period, the price of houses in Victoria Island, Lagos increased by about 30%. It was also within this period that the now popular Eko Atlantic confirmed its first tenant.
Office space demand
In 2015 and 2016, as a result of the fall in demand for houses the demand for office spaces rose. During that time, a good number of housing spaces were converted to office spaces, The demand for office spaces fell in 2018 seeing a corresponding rise in the demand of purchase.
Insights into the Demand Trends
Regardless of the economy, the demand for houses is strictly tied to location this is proven by the fact that although there was a decline in demands, the demand for offices in Ikeja rose. Asides this, even in 2015 when there was a steady decline in the demand for houses, the Lagos mainland market continued to grow. This market saw an increase of 20.43% in 2015 and 2.33% by 2016. By 2017 however, when the demand had stabilized for many other places, the market here was running at a loss of demand seeing only an increase of 0.33%. This happened also in Omole phase 1 and in Ilupeju. It was also during this period that Gbagada recorded its demand.
Even with this constant demand, Nigeria is still running at a housing deficit. According to a World Bank report released in 2013, this housing deficit was about 17m units. Even with this housing deficit, the economy hasn’t significantly improved and as such the major goal has become providing housing that is affordable in order to clear the housing deficit.
Ways Nigeria is Working To Improve Demand
1. Mortgage market
Mortgage is slowly gaining popularity in Nigeria. The Mortgage Banking Association of Nigeria recorded mortgage transactions less than 100,000 between when they were first established in 1960 and 2009. However, within 2010 and 2016, their operations have now increased by 82%. This just points to how even though very little progress is being made, a few Nigerians are benefitting from mortgage. Many financial institutions within the country offer mortgage services to prospective home owners offering both fixed mortgages – offering interest rates over a fixed period of either 15, 20 or 30 years. This is usually the preferred option for individuals who want a structure in their mortgage. Adjustable mortgages that come with interest rates that are adjusted at certain periods over the lifespan of the mortgage are also available.
2. Attractive packages of real estate companies
Many real estate companies have put together various ways to ensure that many individuals have access to affordable housing. They do this via packages that allow an initial down payment and a spread of payment, that allows what needs to be paid across as many months and years needed to get the full payment. Packages offer prospective clients a form of flexibility that allows them access properties they may not be able to afford to purchase upfront.
3. Affordable Housing
Working tirelessly to narrow this housing deficit, many real estate developers have created affordable housing. The government also has made it a priority to provide affordable housing. Lagos State government for example has launched multiple estates that provide affordable housing. The scheme works to basically provide housing that is affordable for low income earners and medium income earners. These schemes are usually on newly built homes that are built to address and capture the needs of their occupants.
4. Build to rent schemes
The build to rent scheme basically addresses having access to high quality homes on a rental package. This addresses needs of perhaps average income earners who do not have enough to buy a house of great quality but enough to pay to use it for as long as they’d like. This is offered by many rental companies and caters for different ranges of income earners.
5. Co ownership
The co ownership scheme is another scheme that is helping to further resolve the housing deficit. With co ownership, two individuals or more collaboratively purchase a home and property. They all have equal rights to the property, and as such no one of the parties involved can take a decision on the priority without the prior information and consent of the other parties involved. The agreements are usually legally binding. A real estate company doesn’t by itself create a co-ownership plan, rather the co ownership parties decide amongst themselves and get the property via the real estate company.
In all, reports have shown that the highest demands on houses are houses that have a coworking and cohabitation space. While there is an unavailability of a comprehensive report that projects 2021, it is clear that with the switch to remote working, there’s a decreased demand on office spaces asides spaces designated as work spaces. Statistics also show that demand for houses are the highest in Lagos (54.8%), closely followed by Abuja (13.6%), Rivers (4.6%), Oyo (2.9%) and Ogun (2.2%). The majority of the demand is for rent (45.6), Sale (32.6%), Short let (6.3%) and Joint Venture (2.2%).