Article summary
- Lagos has a housing deficit of 2.31 million households, with supply falling short of demand.
- Large-scale developments such as Brook Millenium Housing Estate with 3,000 units have been built to address the housing deficit.
- The Naira devaluation has negatively affected rental growth rates in prime areas priced in dollars, while sales value has increased due to the rising costs of construction materials. Expect a neutral market performance in 2023 due to high inflation impacting affordability despite the housing deficit.
As the economic powerhouse of Nigeria, accounting for over 65% of economic/business activity, Lagos has been a popular destination for those migrating from rural areas of the country. As a result, the supply of suitable housing options within the state always falls short of the demand.
So far, the estimated supply, falls short of the 2.31 million household’s deficit pointing to a clear opportunity for developers that has resulted in key large-scale developments such as Brook Millenium Housing Estate with a record 3,000 units recorded in 2022.
In terms of market performance, prime areas such as Ikoyi, Victoria Island, and Banana Island have seen negative growth rates in their rents over the past 5 years particularly because of the properties that are priced in dollars. The drastic Naira devaluation against the dollar has made the prices unrealistically high in prices, therefore causing the need for the reduction.
As for sales value, all areas have seen increase in their 5-year growth rate also resulting from devaluation of the naira currency. As construction materials are majorly imported, the costs have greatly risen due to the naira devaluation. This automatically affects the total cost of construction, which in turn causes sale prices to skyrocket as well.
As such we expect a neutral market performance for 2023. On one hand, supply continues to outweigh demand, however high inflation is expected to continue to impact on affordability.
Author – Bisi Adedun
