Why Lagos developers are chasing prime housing—Sage Grey MD

Sage Grey Group Managing Director, Temitope Runsewe, has said that developers are increasingly seeking financing for housing projects in prime Lagos areas such as Ikoyi, Victoria Island and Lekki, attributing it to rise in middle-class income.

Runsewe disclosed this at the company’s 10th anniversary news conference on Thursday in Lagos.

The comments come as rising property and financing costs reshape Lagos’ residential market, with developers facing growing demand for housing alongside rising affordability pressures.

What Temitope Runsewe is saying

Responding to Nairametrics’ question on the types of real estate projects developers are seeking financing for and what this says about demand, Runsewe said requests are increasingly coming from high-growth, high-income locations.

• He attributed the trend to infrastructure development and rising prosperity among parts of the middle class.
• “Developers are increasingly seeking financing in high-growth, high income areas like Ikoyi, Victoria Island (VI), and Lekki. This is driven by increased infrastructure and growing middle-class prosperity,” Runsewe said.
• He said consumer spending power remains evident despite current macroeconomic pressures, adding that this is reflected in demand for high-end residential properties.

Runsewe cited the strong returns of companies such as MTN as an indication that spending power remains present in parts of the economy and is translating into demand for higher-end housing.

Mass housing could see a boom

Runsewe expects the current pattern to shift over the next two years as rising housing costs make prime locations increasingly unaffordable for middle-income earners.

• He predicted a “sudden boom” in mass housing as developers and residents increasingly look beyond established high-income areas for more affordable options.
• He said the affordability gap is already pushing residents towards locations farther from prime districts, where housing costs are significantly lower.
• A two-bedroom apartment in a prime area could cost about N18 million in annual rent, compared with about N600,000 farther out, he said.
• “With improved infrastructure like the coastal road, a 25-minute commute is highly acceptable if it saves you from spending your entire annual salary on rent,” he said.

Runsewe expects development to increasingly spread towards the edges of Lagos and along major transport corridors as developers respond to affordability constraints in established prime markets.

Get up to speed

The concentration of developer financing in prime Lagos locations comes amid rising land, construction and financing costs, which are making residential development increasingly expensive across the city.

• Ayodeji Johnson, CEO of Elara Development, who is developing a 12-storey residential project in Victoria Island, told Nairametrics that constrained land supply and strong demand continue to support property values in prime locations.
• He said high land and financing costs are influencing the type of housing developers bring to the market, making lower- and middle-income projects more difficult to deliver profitably.
• “I don’t think the economics are pushing developers towards luxury housing purely by choice. In many cases, it is closer to necessity,” he told Nairametrics.

Johnson said lower financing costs, tax incentives and faster approvals would make affordable housing more commercially viable for private developers.

He also expects vertical development to become increasingly important as Lagos faces limited land and rising housing demand, particularly in Ikoyi, Victoria Island, Oniru and Lekki Phase 1.

What you should know

Lagos has a homeownership rate of 31%, while 51% of residents live in rented accommodation, according to Fortren & Company.

• The report, which assessed 10 major African cities based on economic significance, expatriate and professional activity, and rental market maturity, found wide differences across the markets.
• Nairobi recorded the highest homeownership rate at 61%, while Abidjan had the lowest at 22%. Kampala recorded 29%, Addis Ababa 33% and Dakar 50%.
• Fortren & Company noted that Nigeria’s 31% figure covers people living in their “personal house”, whether built, purchased, gifted or inherited, and is not limited to mortgage-financed homes.
• Meanwhile, prime land in Lagos costs about US$1 million for 507 square metres, making it the second-most expensive among 11 major African cities surveyed by Estate Intel. Only Cape Town was more expensive, with US$1 million buying about 329 square metres, while Casablanca ranked third at 633 square metres.

The report attributed Lagos’ high land values to strong demand for prime locations, limited land supply and infrastructure gaps. The analysis covered Ikoyi, Victoria Island and Lekki Phase 1, where competition for development sites remains high.

It also noted that the concentration of new housing in luxury and deluxe developments, coupled with limited access to affordable mortgages and high interest rates, is widening the affordability gap for many households.