Introduction
The size and scale of the Nigerian real estate market make it an attractive and lucrative opportunity for many investors. Understanding the various factors influencing the Nigerian real estate market is essential for anyone looking to capitalise on this dynamic sector. But not only investors can earn from real estate capital appreciation. Individuals can invest directly in actual real estate or indirectly through managed funds.
Investing directly in real estate involves purchasing a residential or commercial property to use as an income-producing property or to sell at a future time.
Indirect ways to invest in the real estate market include real estate investment trusts (REITs), real estate exchange-traded funds (ETFs), commingled real estate funds (CREFs), and infrastructure funds. Due to greater liquidity, lower transaction costs, and lower capital requirements, investors typically prefer to invest indirectly in real estate.
What Factors Affect the Price of a House?
When evaluating the price of a house, several key factors influencing the Nigerian real estate market come into play. These factors include the cost of construction, market rates of similar properties, the age, size, and condition of the property, its location, and the overall health of the housing market. Understanding these determinants is vital for both prospective buyers and sellers in the Nigerian real estate market.
What Is the Biggest Threat to the Real Estate Industry?
A weakening economy or recession may be the biggest threat, due to the potential for people to lose their jobs and for household income to drop. This can not only squelch demand but also may make it difficult for people (and companies) who own properties to continue paying their mortgages. Property supply might also slow down as developers have less money to finish projects.
Read Also: Building Materials Prices Disrupt Hopes of Homeowners and Developers
How Does Inflation Impact the Real Estate Market?
Inflation is a critical factor as it can cause property prices to increase. That’s because, as construction costs rise with inflation, fewer businesses can afford to build new units. This limits supply, which, if demand for properties persists, puts upward pressure on prices in the Nigerian real estate market. Understanding the intricate relationship between inflation and property values is essential for investors and homeowners alike.
Conclusion
This article introduces the high-level factors influencing the Nigerian real estate market that play a significant role in moving real estate investment. Although some of these factors suggest a clear-cut relationship between cause and effect, in practice, the results can be very different.
However, for investors, understanding the key factors that drive the Nigerian real estate market is essential to a comprehensive evaluation of a potential investment.
cc: Investopedia