Following rising demand for commercial space and housing for middle-income and young professionals in Nigeria, the nation’s real estate market has continued to grow with the sector now valued at N6.4 trillion ($41.2 billion).
According to a report by Agusto & Co., the Lagos sub-segment of the market accounts for at least 40 per cent of the Nigerian market.
Growth, the report revealed, continues to be driven largely by new to market residential and commercial properties in Lagos, Abuja and Port Harcourt.
The report estimates the market to grow by an estimated average of 10 per cent in 2014 and 2015 respectively.
“The Lagos real estate market, which has evolved in the last decade, continues to report significant growth in both the residential and commercial sub-segments. The key growth factors include population growth, economic growth, rapid urbanization, rising consumer disposable income and the introduction of mortgages.
"Supply of real estate properties in Lagos have been supported by the improvement in land titling and ownership transfer, government’s development plans and improved security framework in the state. The Lagos real estate market was delineated under the residential and commercial segments for adequate coverage, “Agusto & Co. said.
The report added that the Lagos residential market remained strong across the various sub-markets adding that new residential investments were prominent in the prime markets comprising Ikoyi, Victoria Island, Lekki and Ikeja GRA.
“Our research also revealed that new residential investments in the prime markets targeted the growing expatriate community and affluent indigenous tenants. Supply of new residential investments in the most mainland markets remained subdued due to shortage of land, leaving property developers with the option of buying and remodelling old properties.
“However family holdings in the mainland market remained a limiting factor to the buying & remodelling option. Owing to the low concentration of affluent and expatriate tenants on the mainland, residential property developers are strongly attracted to the prime markets, “it added.
Rentals and sales prices, the report, revealed, were higher in the prime market compared to the mainland market.
According to the report, typical rental for a 3-bedroom luxury residential property was highest in Ikoyi at an average of ₦10.4 million ($65,000) per annum, with a rental yield of 9.9 per cent. Conversely, rental price changes were prominent in the mainland market, with Surulere recording a high cumulative rental price change of 29 per cent from January 2011 to April 2014.
It further stated that sale prices were also highest in the Ikoyi sub-market, with the price of a 4-bedroom detached house on a 2000m² land trending up to ₦856 million in the first half of 2014. Land prices in Lekki and Victoria Island reported the largest cumulative change of 23 per cent and 22 per cent respectively between 2011 & 2014. The Ibeju-Lekki development plan remains a strong driver of land and property price changes in the areas.
“Market perception for the Ikorodu sub-market declined in the review period due to the slow infrastructural development in the area. Although the on-going construction of the mono-rail and the Lagos-Badagry expressway has negatively impacted real estate activities on the Badagry axis, we believe completion of the projects will support growth of real estate properties in the sub-market," the report revealed.
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