When considering real estate investment in Africa, Ghana, Nigeria and Kenya are currently the most active jurisdictions. For Nigeria, the growing population and rising per capita income levels have boosted spending power across a wide range of the populace, fuelling growing demand for consumer products especially housing.
According to Imob Homes, a fast rising real estate company in Abuja, Nigeria’s real estate moved from 6th to 3rd in 2019 on Absa’s Financial Markets 2020 Index. The quick shift in position is linked to the rise and domination of Nigeria as an investment destination for startup venture and capital investment on the continent.
The real estate market in Nigeria is growing. Whether it is the movement of demand away from Grade A office, retail and big brand hospitality to the adoption of technology. Also for healthcare, infrastructure, security and mortgages, there has been an attempt on more changes over the last 10 months than in the last 3 years in attracting investors. A successful real estate investment in Nigeria can earn yearly returns as high as 40─45%.
In Abuja, the country’s capital, the yearly average yield of rental properties is currently at 8% with a typical 3 bedroom flat in the most popular areas in Abuja ranging from ₦3,000,000 in Maitama, ₦2,500,000 in Wuse 2. While in Asokoro – ₦3,500,000, and Garki – N1,800,000.
Abuja is Nigeria’s fastest growing city at a rate of more than 35% since 2016, with an internally generated revenue (IGR) that is next to that of Lagos and Rivers State. Aside from being the capital city, Abuja’s decent environment is an incentive for accommodating a burgeoning middle class with a taste for contemporary buildings and constructions, making real estate a top driver of the Abuja economy.
The high-end luxury residential segment has long been a key revenue generator for developers. Imob Homes boasts of properties in a handful of neighbourhoods, including Maitama, Asokoro, Jabi, and Wuse. Most of these areas command housing prices that rank among the highest in Africa and considerably high in many western markets.
Central business districts are no longer the destination for new developments as certain suburbs are reconsidered in more research driven decisions. Real estate investment managers are embracing technology more intently to forecast performance metrics. This has also informed Imob Homes in expanding their housing investment in areas like Wuye, Jahi and Lifecamp in order to extend quality housing to the growing middle class.
The year 2019, was a great year for Nigeria’s real estate market, with demand for property rising by double-digit figures. An end-of-the-year report by Nigeria Property Centre (NPC), stated that, the number of property listing enquiries in the year surged by 72% from the previous year- 2018.
Despite the unprecedented shifts and shocks of 2020 and COVID-19 effects on the world’s economy; crude oil prices hovering around $42/b, increased rate of unemployment, job loss and salary cut, the real estate market is already picking up fast again and local real estate experts and stakeholders remain optimistic.
A range of pressing challenges in Nigeria may not, in any way, deter the continuous expansion of real estate in the country.
Real estate investment is a long-term strategy to hedge against inflation. The annual inflation rate in Nigeria stood at an average of 12.88% as at 2020. What this means is that the value of Naira has depreciated above 9-12% a percentage level the CBN considers a negative influence on the economy. So, when you invest in real estate with its current earnings, you are protecting the value of your income from eroding. The long-term capital gains derived from real estate investment means that an investor would always be better off holding property, particularly in cities like Abuja, than other investment channels.