The Lagos State residential market is poised for a period of slow growth throughout the remainder of the year, despite a noted contraction in the real estate and construction sector’s contribution to Nigeria’s GDP in the first quarter of 2024. This slowdown is largely attributed to prevailing economic instability, which has engendered uncertainty among both domestic and foreign investors, leading them to adopt a cautious “wait-and-see” approach. The uncertainty pervades both the real estate market and the broader Nigerian economy, making investment decisions more challenging. However, the underlying demand for residential properties in Lagos remains robust, driven by persistent population growth and ongoing urbanization, suggesting that the market retains its fundamental strength despite these headwinds.
While economic anxieties may impact affordability, the demand for affordable housing is expected to remain a strong driving force in the market. This sustained demand is coupled with a slowdown in construction activities, creating a tighter supply of residential properties. This constrained supply, in turn, intensifies competition for available units, particularly in highly sought-after areas, and exerts upward pressure on property prices. Consequently, rent growth is projected to decelerate compared to previous years, and potential renters are likely to encounter increased competition for desirable units. The report suggests that this economic pressure may lead renters to consider smaller apartments or shared living spaces as a means of managing costs.
The prevailing economic uncertainty also influences rental occupiers’ preferences, potentially pushing them towards smaller living spaces or shared accommodations to mitigate the impact of rising costs. The government’s role in this evolving landscape is crucial. Policies that encourage real estate development, particularly within the residential sector, are expected to play a significant role in stimulating market growth and addressing affordability challenges. Despite the current challenges, the fundamental demand for residential properties in Lagos remains resilient, underpinned by demographic trends and urbanization.
A key finding of the report is the dominant preference for smaller to medium-sized apartments in Lagos. Specifically, 43% of respondents reside in 2-bedroom apartments, closely followed by 41.5% living in 1-bedroom apartments. This trend underscores a strong demand for these unit types, primarily driven by single individuals and small families. Furthermore, the analysis reveals that the most common rental payments fall within the range of N500,000 to N1 million per annum. This price bracket aligns with the reported income distribution among respondents, which predominantly falls within the N100,000 to N500,000 monthly income range, further highlighting the importance of affordability in the rental market.
The report also delves into rental payment preferences, revealing that despite the Lagos State Government’s plans to implement a monthly rent payment scheme in 2025, a significant majority (62.6%) of respondents still prefer annual rental payments. This preference for annual payments might be attributed to cultural norms, existing contractual arrangements, or a perceived financial advantage. Despite the current focus on rental accommodations, a substantial 89.6% of respondents express their intention to own property in the future, indicating a strong aspiration towards homeownership. This aspiration is further supported by the Federal Government’s initiatives to improve access to affordable housing, such as the May 2024 increase in the National Housing Fund mortgage limit from N15 million to N50 million. This move has made mortgage plans the most preferred option for property ownership among Lagos residents.
In summary, the Lagos residential market is navigating a period of slow growth due to economic uncertainties, prompting investors to exercise caution. However, the market’s underlying strength persists, driven by continuous population growth and urbanization. The demand for affordable housing remains strong, while supply constraints are expected to intensify competition and influence rental preferences towards smaller units or shared spaces. Government intervention through supportive policies will be crucial in shaping the market’s trajectory. The preference for smaller apartments, coupled with the alignment of rental costs with prevailing income levels, underlines the importance of affordability. While a significant portion of residents currently rent, the aspiration for homeownership remains high, bolstered by government initiatives to improve housing accessibility.
