NIGERIAN PROPERTY MARKET: PROSPECTS IN THE MIDST OF CHALLENGES
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NIGERIAN PROPERTY MARKET: PROSPECTS IN THE MIDST OF CHALLENGES
CHAPITRE ONE
INTRODUCTION
1.1 BACKGROUND OF THE STUDY
The property market is a major recipient of foreign direct investment, and the extent to which it develops determines how much it can contribute to and support a nation’s economy. The Nigerian property market, despite its potential, like analogous sectors in numerous African emerging nations, has not benefited from internationalised property investment and remains understudied (Babawale, 2008).
With rising rents, major housing deficits, and over-regulation, the Nigerian property market is a tangle of opportunity and unique problems that only the most optimistic investors can effectively convert into practical, long-term profits.
Nigeria, Africa’s largest economy and most populous nation (with over 178 million people), is destined to top the list for Africa’s most costly residential, property, and office location. With two of its major cities,
Abuja and Lagos, trailing Angola (with average monthly rental charges of $150 per square metre of prime office space and annual rental charges of $25,000 per four-bedroom house), it is not surprising that there is growing interest in the lucrative prospects of up to $400 billion in real estate opportunities (JLL, 2010).
The rapid rate of population expansion in Nigeria, combined with the substantially slower rate of housing production, has resulted in a stunning housing deficit of 17 million units. This ultimately led to dramatic increases in rent prices, with the typical executive 4-bedroom house in Abuja costing $8,500 per month and the average executive 4-bedroom property in Lagos costing $8,000 per month.
While there are opportunities in the market, there are also numerous impediments that may dissuade investors from moving forward in the Nigerian property market. Rental yields can reach 10% and greater, but growing building material costs, owing to significantly higher cement prices,
threaten the sustainability of such benefits, since the average cost of building a home in Nigeria (about $50,000) rises year on year. The nation’s considerable infrastructure deficit has also led to increased expenses (JLL, 2010).
According to reports, the rising cost of housing is due not only to the cost of manufacturing materials, but also to the regulatory charges of building a home in Nigeria, which can account for up to 20% of the entire cost of construction.
Property registration is a key cost element because 65%-70% of land in Nigeria is held under customary title, which may necessitate court actions to appropriate the rightful holder of the title to plots of land.
Because of complications like this, the registration process has become both longer and more expensive than necessary, costing 20.8% of the value of a Nigerian property.
In addition to offering favourable rent prices for landlords and other comparable investors, the Nigerian property market offers significant returns on investment that cannot be overlooked by investors looking to purchase property in the country,
where an investment in real estate can yield returns of 30-35%. For example, the high-end Lagos market demonstrates the possibility for profitable investments, with houses selling for $1.37 million (JLL, 2010).
While such figures inspire optimism in the Nigerian real estate sector, it is important to remember that there is a demand for affordable homes. Despite the fact that Nigeria’s middle class is growing, over 87 million Nigerians live on less than a dollar a day.
This fact poses both challenges and opportunities, as it is apparent that the housing market will grow robustly in the long run, but it must be addressed using techniques that avoid the paradigm of the majority of the population being priced out of the market.
What may come as a surprise to some is that only 5% of housing units in Nigeria were mortgage-financed, with the majority of Nigerians relying on their personal savings to buy or build homes due to a variety of factors, the most important of which is a lack of affordable financing.
This has a detrimental impact not just on the demand for homes in Nigeria, but also on property developers who may be hoping to raise finance for their investments. There are, however, ways to overcome such obstacles, as evidenced by the acts of renowned Nigerian property developers that use cost-cutting tactics such as building on demand (selling all housing units before construction) (Aluko & Amidu, 2005).
Doing business in Africa is never simple. What may be intimidating about Africa’s business obstacles is not that they are impossible to solve, but rather that they are more specific and appear to be stronger than challenges presented in other emerging regions.
This should not be allowed to eclipse the golden opportunities and rewards that the tenacious and persistent may obtain. Difficulty is simply opportunity disguised as difficulty.
1.2 STATEMENT OF THE PROBLEM
Despite its size and strength, the Nigerian property market appears to have received insufficient attention from overseas investors. It has just lately received a smattering of industry-based assessments and probably a handful of academic studies, and the practise is rarely sustained.
It appears that it was regarded to have many issues; nevertheless, no empirical study on the Nigerian property market has been completed to date to identify its state, as has been done for similar property markets elsewhere. As a result, investor impression of the market will continue to be based on myths rather than empirical evidence (Lim et al. 2006).
1.3 OBJECTIVES OF THE STUDY
The following are the study’s objectives:
1. To investigate the potential of the Nigerian real estate market.
2. To identify the Nigerian property market’s issues.
3. To look into the current state of the Nigerian property market.
1.4 RESEARCH QUESTIONS
1. What are the prospects for the Nigerian real estate market?
2. What are the Nigerian property market’s challenges?
3. What is the current situation of the Nigerian real estate market?
1.6 SIGNIFICANCE OF THE STUDY
The following are the study’s implications:
1. The purpose of this study is to inform the general public, particularly investors, about the current situation of the Nigerian property market in order to identify opportunities and obstacles.
2. This research will also serve as a resource base for other academics and researchers interested in conducting additional research in this sector in the future, and if utilised will go so far as to provide new explanations for the topic.
1.7 SCOPE AND LIMITATIONS OF STUDY
This study on the Nigeria property market; prospects in the midst of challenges will examine the situation of the Nigeria property market in order to identify challenges and analyse prospects.
STUDY LIMITATIONS
Financial constraint- A lack of funds tends to restrict the researcher’s efficiency in locating relevant materials, literature, or information, as well as in the data collection procedure (internet, questionnaire, and interview).
Time constraint- The researcher will conduct this investigation alongside other academic activities. As a result, the amount of time spent on research will be reduced.
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