Market in Depth

Nigeria's housing market stabilizing, amidst improving economic conditions

Lalaine C. Delmendo | July 14, 2019

After three years of house price falls, Nigeria's property market is now stabilizing, mainly driven by improving economic conditions. House prices were almost unchanged, amidst steady demand.

“The residential real estate market in 2018 was without significant changes in prices compared to the previous year,” said Nigeria-based online real estate firm, PropertyPro.ng.

However, this masks local house price movements. Ikoyi, the most affluent neighborhood of Lagos, registered the highest y-o-y house price growth of 20% in May 2019, followed by Ibeju Lekki, with annual price increase of 12%, based on figures from the Nigeria Property Centre. House prices in Lekki, Ajah, Gbagada, Surulere, and Yaba were largely steady.

On the other hand, Ikorodu saw the biggest decline in house prices of 25% during the year to May 2019, followed by Ikeja (-16.7%), Alimosho (-10.7%), Isolo (-9.1%), and Victoria Island (-8.7%).

Lagos is the most expensive city in Africa. In Ikoyi, the average price of three-bedroom apartments was NGN 140 million (US$388,906) in H2 2018 while five-bedroom apartments are sold for an average price of NGN 350 million (US$972,266).

In other popular areas outside Lagos:
  • Abuja, the capital city of Nigeria, is experiencing increasing interest from both local and foreign investors. In Maitama, an upscale neighborhood in Abuja, the average price of four-bedroom apartments was NGN 213 million (US$591,693) while five-bedroom apartments were sold for NGN 350 million (US$972,266) in H2 2018.
  • In Rivers, the average prices of three- and five-bedroom apartments were NGN 40 million (US$111,116) and NGN 75 million (US$208,343), respectively.
  • In Oyo, the average prices of three- and five-bedroom apartments were NGN 13 million (US$36,113) and NGN 40 million (US$111,116), respectively.
  • In Ogun, the average price of three-bedroom apartments stood at NGN 11.5 million (US$31,946) while it was NGN 30 million (US$83,337) for five-bedroom apartments.

The housing market will continue to stabilize this year, with house prices and residential rents expected to either remain stable or rise modestly this year, according to local property experts.

In 2018, Nigeria's economy expanded by 1.9% in 2018, an improvement from a minuscule growth of 0.8% in 2017 and a contraction of 1.6% in 2016, buoyed by improvements in manufacturing and services, supported by the continued recovery in the oil sector, according to the International Monetary Fund (IMF). The economy is projected to improve further, with growth forecasts of 2.1% this year and 2.5% in 2020, based on IMF estimates. But the Central Bank of Nigeria is more optimistic, projecting a 3% growth this year.


Analysis of Nigeria Residential Property Market »

Rental Yields

Nigerians are turning to rented accommodation

The Lagos Island market has experienced continuous rises in average asking prices over the last three years, with surging demand for luxury houses, particularly from investors and high-income individuals. The Lagos mainland, on the other hand, exhibited marginally decreasing prices in 2013.

Asking rents have been rising. After a lackluster year in 2011 asking rents in both the Lagos markets bounced back in 2012 with double-digit growths.

While asking rents are much higher on the Lagos Island, rental yields are generally higher in the mainland due to the surging prices in the island market. Yields are moderate at 4.3% for the Lagos Mainland and 3.64% for the Lagos Island.

Read Rental Yields »

Taxes and Costs

Rental income tax is low

Rental Income: For nonresidents, gross rental income earned from leasing out real property is taxed at a final withholding rate of 10%.

Capital Gains: Capital Gains tax is levied at a rate of 10% on the gains realized from the disposal of real property. Property acquisition costs and incidental costs in transferring property ownership (i.e. stamp duty, professional costs, and advertising) are deductible.

Inheritance: There are no inheritance taxes in Nigeria.

Residents: Residents are taxed on their worldwide income at progressive rates, from 7% to 24%.

Read Taxes and Costs »

Buying Guide

Very high costs, corruption-prone system

The total roundtrip transaction cost is around 27.60% to 31.275%. This includes several permits, fees and charges.

The biggest cost is the 8% consent fee paid to the state government. This seems to be a screening mechanism for collecting bribes. There is also a registration fee of 3%, paid by the buyer.

Read Buying Guide »

Landlord and Tenant

Strongly pro-landlord rental market

Nigeria luxury houses for saleNigerian rental market practice is extremely favorable to the landlord.

Rent: Rents are freely determined; the Rent Control Law of Lagos is not implemented. Rents are paid well in advance, for two to three years.

Tenant Eviction: Because the court system is cumbersome and expensive, most landlords prefer to evict tenants using an assortment of tricks, phony legal cases, intimidation, locking out tenants or physically throwing them out of the unit.

Read Landlord and Tenant »

ECONOMIC GROWTH

Economy improving, but unemployment continues to rise

Nigeria’s economy expanded by 1.9% in 2018, an improvement from a minuscule growth of 0.8% in 2017 and a contraction of 1.6% in 2016, buoyed by improvements in manufacturing and services, supported by the continued recovery in the oil sector, according to the International Monetary Fund (IMF). The economy grew by 2.01% in Q1 2019 from a year earlier.

The oil sector grew by 1.14% in 2018 while the non-oil sector expanded by 2% over the same period, according to the NBS. In Q4 2018, oil production stood at 1.91 million barrels per day.

Nigeria exchange rate
There had previously been growth rates of 2.7% in 2015, 6.3% in 2014, 5.4% in 2013, 4.3% in 2012, and 4.9% in 2011. The economy grew strongly from 2001 to 2010, with an average real GDP growth rate of 8.9% every year.

The economy is projected to improve further, with growth forecasts of 2.1% this year and 2.5% in 2020, based on IMF estimates. But the Central Bank of Nigeria is more optimistic, projecting a 3% growth this year.

In May 2019, Nigerian President Muhammadu Buhari signed an ambitious budget into law, amounting to NGN 8.92 trillion (US$ 24.81 billion), in an effort to boost the economy and increase its expenditure on security to help the government combat rising militancy and kidnapping across the country.

Nigeria gdp inflation
Buhari won a second term in the February 2019 elections, defeating his pro-business rival Atiku Abubakar who had pushed for privatizations and a shift towards a free-floating exchange rate regime.

In April 2019, nationwide inflation stood at 11.37%, slightly up from the previous month’s 11.25%, amid a surge in food prices, according to the National Bureau of Statistics (NBS). After an annual average of 10% from 2006 to 2015, inflation climbed to almost 15% every year from 2016 to 2018.

Unemployment is rising sharply. In Q3 2018, the overall unemployment rate stood at 23.1%, up from 22.7% in Q2 2018, 21.8% in Q1 2018, 20.4% in Q4 2017 and 18.8% in Q3 2017, according to the NBS. Also, it was a sharp increase from an average unemployment rate of 8.8% from 2010 to 2016, according to the IMF.

Youth unemployment was very high, at 55.4% in Q3 2018.