Northcourt: Nigeria’s real estate market to grow 7.24% in 2024

Nigeria's real estate market is poised for a 7.24% growth, reaching an estimated value of 2.14 trillion dollars by the end of this year, according to Northcourt's latest report. The market's projected expansion is said to be primarily fueled by population growth, which continues to drive the demand for residential properties. Ayo Ibaru, Chief Operating Officer and Director of Real Estate Research at Northcourt, highlighted some key takeaways and challenges facing the sector in a recent interview with CNBC Africa. Reflecting on the dynamics of investor participation in the real estate market, Ibaru pointed out that despite initial optimism among international investors at the beginning of the year, challenges like inflation, market stability concerns, and recent protests have put significant transactions on hold. He emphasized the importance of addressing social, cultural, and political issues to attract and retain global investment in the country. Developers in Nigeria are adapting their strategies to navigate the tough market conditions, particularly the impact of currency volatility on construction costs. With 90% of construction materials being imported, developers are focusing on building properties based on client demand and off-take agreements. Ibaru noted that developers now typically start projects only after securing a significant portion of sales upfront, a strategy aimed at mitigating risks associated with currency fluctuations. Commercial real estate, especially at the grade A level, has faced challenges in the Nigerian market. While owner-occupier projects have seen some progress, purely commercial assets have struggled to generate expected returns. Retail spaces have experienced reduced demand due to declining purchasing power and smaller basket sizes, leading some grade A retail establishments to close down. However, mixed-use developments combining office, short-term rental, and retail spaces have shown resilience and gained traction in the market. Despite the uncertainties surrounding currency fluctuations and market conditions, Ibaru discussed signs of growth in the real estate sector. Land transactions have increased, indicating a 'flight to safety' trend among investors during uncertain times. High net-worth individuals (HNIs) have continued to invest in high-end residential properties, while government infrastructure projects have contributed to growth in low to mid-income developments. The development of infrastructure, such as the Lekki-Epe Expressway and the Dangote refinery project, has also influenced property values in certain areas. Looking beyond Lagos, the real estate market in Abuja is also showing promising trends. Infrastructure developments have spurred activities in entertainment, retail, and residential sectors. Additionally, hospitality and healthcare investments are on the rise, with projects focusing on remodeling existing structures and developing new properties to meet market demands. In conclusion, Northcourt's report paints a mixed picture of Nigeria's real estate landscape, highlighting both challenges and opportunities for investors and developers. As the sector grapples with currency volatility, social unrest, and changing consumer habits, strategic adaptation and targeted investments will be key to unlocking the market's growth potential in the coming years.