- PROJECT TITLE: NIGERIAN PROPERTY MARKET: PROSPECTS IN THE MIDST OF CHALLENGES
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1.1 BACKGROUND TO THE STUDY
The property market is a major receptacle of foreign direct investment and the extent of its development determines the extent to which it can contribute and buoy a nation’s economy. The Nigerian property market with its potential, like similar markets in several emerging economies in Africa, has not benefitted from internationalized property investment and remains poorly researched (Babawale, 2008).
With surging rents, significant housing deficits, and over-regulation, the Nigerian property market is a matrix of opportunity and unique challenges, which only optimistic investors would be able to successfully convert into viable, long-term profits.
Having already attained titles of being Africa’s largest economy and most populous nation (with over 178 million people), Nigeria seems bound to also top the list for Africa’s most expensive location for residential and property and office. With two of its major cities, Abuja and Lagos, following closely behind 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 should come as no surprise that there is growing interest in the lucrative prospects of up to $400 billion in real estate opportunities (JLL, 2010).
The fast rate of population growth coupled with the significantly slower supply rate of housing in Nigeria has led to a startling housing deficit of 17 million units. This inevitably led to sharp increases in rent prices, with the average executive 4-bedroom house in Abuja being rented for a monthly price of $8,500 and the average executive 4-bedroom house in Lagos, being rented for $8,000 per month.
Whilst opportunities are present in the market, there are also an abundance of obstacles, which may deter progress for investors in the Nigerian property market. Rental yields can reach 10% and above but rising costs of building materials, as a result of the relatively higher cement prices, threaten longevity of such benefits as the average cost of building a home in Nigeria (approximately $50,000) increases year on year. The significant infrastructure deficit of the nation has also contributed to the rising costs (JLL, 2010).