5 trends that will shape Lagos’ real estate market in 2022

From increased proptech funding, with a number of Nigerian startups getting to the global space, to increased construction activity, 2021 marked a remarkable year for the Nigerian real estate market. Our analyst projects that 2022 will be even more interesting. A number of factors including higher proptech funding, pent-up residential demand in major cities, and increased co-living adoption among young people, are set to shape the Nigerian real estate market in 2022. While these paints an interesting future, the recurring building collapse across the country, will bring more scrutiny to market participants. Additionally, we project that the ongoing Russian-Ukraine crisis and the looming global inflation will prompt a slow down in home acquisition. This is in response to a decline in excessive spending. Keep reading, as we discuss this further in the following paragraphs.

We expect to see higher proptech funding in 2022 compared to 2021

Despite the fact that the industry in Nigeria is still at an infancy stage, 2021 was a particularly exciting year for proptech. As of the beginning of Q3:2021, more than $2million were already recorded in disclosed funding rounds by Nigerian proptech companies. These include Eden Life, Spleet, Estate Intel, Rent Small Small, and a number of others who had raised money during the year. These funding rounds also gave the Nigerian footprint to some of the world’s largest accelerators including Metaprop and Techstar Accelerator. We expect to see more global and African proptech funding coming to Nigeria in 2022, as startups firms take learnings from last year’s success stories and position themselves for funding this year.

Pent-up demand for smaller sized apartments due to changes in demographics

Approximately 40% of Nigeria’s population according to the Nigerian Bureau of Statistics falls between the ages of 15 to 39 years. In Lagos, the number is closer to 50% and this shows how young Nigeria’s population is. Over the past few years, a tough economic situation has forced many single young people, especially in Nigeria’s core cities, to rethink their space needs. In Lagos, there’s been an increased demand for smaller-sized, but well-built serviced apartments. This trend has been exacerbated since the pandemic broke out in early 2020, and we do not expect to see the demand slowing down at least in the short to medium term.

Co-living and Apartment Sharing will see greater adoption among the young demographics

With prices increasing almost 100% over the past 5 years in most locations across Lagos, the concept of co-living has grown in popularity. A number of Nigeria’s working population, especially in Lagos and Abuja, have been forced to share apartments with their friends, and sometimes strangers. This is in a bid to cushion the effect of high rents and other additional charges. Although this arrangement usually does not sit well with landlords, we expect to see more adoption, especially in Lagos and Abuja as rents continue to rise. 

More developer and product scrutiny

Following the several incidents of building collapse over the past decade, more eyes have been on real estate developers and their projects. This was exacerbated by the incident at 360 Degrees Ikoyi, last year, that forced the Lagos State Government to order demolition of surrounding towers. Since then, potential home buyers are digging deeper to validate the structural integrity of buildings as well as the reputation of project sponsors especially developers and main contractors. We also expect this trend to continue during the course of the year, especially for high-value projects.

Crisis induced surge in construction costs

Since 2019, the invasion of Ukraine by the Russian military has become the most discussed topic globally after COVID-19. The world has not been at rest in the past week and analysts, across the world are discussing the potential impact of the unrest in global business and across industries. For Nigeria, we project to see the additional strain in construction activity and significant hikes in construction costs. According to the World Steel Association, Russia is the 5th largest producer and exporter of steel, which is a major imported construction input here in Nigeria. With the crisis in mind, global production and logistics for steel and other construction materials will be halted and this will impact the Nigerian construction sector. Additionally, with the accompanying oil prices rise and overall global inflation in view, potential home buyers would be taking a wait-and-see position. Amidst this crisis, we expect to see more people seeking rental property in secure neighborhoods, but holding off on property purchase decisions in a bid to cut down on luxury spending. While this presents a good opportunity for rental properties in safe locations, it will impact home purchases at least in the short to medium term.

We would love to hear your thoughts. Send us your comments and feedback to research@buyletlive.com and we will like to keep in touch. You can follow us on LinkedIn and Instagram to get more insights into what is happening in the Nigerian real estate market.

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