Land was the king of the property market in 2022 as it outpaced other real estate assets put on the market in terms of price growth. Its price grew by 22.88 percent, ahead of residential and short-let assets, which grew by 18.13 percent and 19.05 percent respectively.
The three assets demonstrated resilience within the period, growing by those numbers despite inflationary pressures and other market challenges, according to a survey conducted by BuyLetLive, an online property research platform.
Experts say that the price growth was to be expected in a country that experienced high inflationary pressure throughout last year, starting with 15.60 percent in January and rising to 21.34 percent in December, which marked a 5.74 percentage point increase in the rate of inflation within the period.
According to them, the highest inflation rate was recorded in November, at 21.47 percent, giving a 5.87 percentage point difference in the 11-month period. Another factor that helped the rate of price increase was the volatile exchange rate regime.
The parallel market exchange rate, which started at N564 per $1 at the beginning of the year, was more than N872 per $1 in October 2022.
The Monetary Policy Committee of the Central Bank of Nigeria, in a bid to curb inflation in the country, also raised the monetary policy rate from 11.5 percent to 16.5 percent at the end of last year.
All these, the experts say, piled pressure on commodity prices, including prices of building materials, labour and other components of real estate assets supply.
On the other hand, more people have become aware that property, especially in high-growth regions like Lagos, is one of the safest investment channels, while security has become a key concern for Lagos residents and, therefore, is a key factor driving demand for gated estates across the city.
In Lagos, while millennials topped the chart of demand drivers for the rental market, the prime residential market was primarily driven by high net-worth individuals, expatriates and diplomats.
Among other reasons, land in Lagos is scarce and demand for it is high. With its large population estimated at 20 million, the city is only 3,577 square kilometres or 358,862 hectares, representing only 0.4 percent of Nigeria’s 923,773 square kilometres of territorial land.
Commenting on the growth, Temitope Runsewe, CEO of Dutum Construction, said the real estate market in Nigeria grew significantly in 2022 in terms of projects that were executed.
“New asset classes have emerged and investment in the sector increased in the course of the year. However, the limiting impacts of rising inflation and the increasing cost of construction materials has remained a major setback, especially for developers,” he added.
In three other cities surveyed, including Abuja, Rivers and Oyo, land also tops price growth. In Abuja, which is the second largest real estate market in Nigeria, land price in the last 12 months grew at 22.81 percent while residential and short-let apartments grew at 16.52 percent, 19.50 percent respectively.
Overall, the property market in Abuja did well just like Lagos within the period under review. Martin Uche, research lead at BuyLetLive, explained to BusinessDay that currency crisis, cost of construction materials, and excessive price speculation encouraged developers to increase their prices.
“Millennials and baby boomers are driving transactions; young professionals and young families constitute almost 80 percent of the rental transaction in Abuja based on data that we are tracking,” he said, pointing out that Guzape, Maitama, Asokoro, and Katape extension lead in terms of investment destination because of infrastructure and the access they provide.
Oyo State also recorded significant growth in land as well as other asset prices. Over the past 12 months, the residential, land, and short-let markets in the state have grown at 10.38 percent, 13.59 percent, and 11.87 percent, respectively.
The survey notes that over the past few years, the state’s proximity to Lagos, alongside the completion of the Lagos-Ibadan Railway project, has positioned its real estate market for growth, adding that regions like Bodija, one of the city’s most prime locations, and Moniya, where the railway station is located, are poised for growth.
There has been slight improved infrastructure development in these locations, which also helped the price growth. “Infrastructure not only influences real estate market performance, but is also the biggest value driver across all real estate asset classes,” Uche said.
He pointed out, however, that even with this slight improvement, investment in Nigeria’s infrastructure over the past decade has remained relatively low when compared to the annual budget, which is less than 9 percent on average, and less than 1 percent on average compared to the GDP.