Rental Properties Set to Dominate Nigerian Real Estate Market in 2025

Rental properties, encompassing both residential and commercial spaces, are projected to dominate transactions in Nigeria’s real estate market in 2025, according to industry analysts.

This forecast arises from ongoing macroeconomic challenges, including rising unemployment, population growth, and rapid urbanization, all compounded by the economic realities of 2024.

While some experts anticipate an increase in overall market demand, factors such as high inflation—which peaked at 34.6 percent in November 2024—elevated interest rates, and volatile exchange rates have dampened homebuying prospects. Inflation has significantly weakened consumer purchasing power, making homeownership unattainable for many Nigerians. Consequently, rental properties have become the default housing option, sustaining demand even as property sales slow.

“Inflation has eroded consumer purchasing power, meaning many people cannot afford to buy homes. Renting remains the only viable option for most,” explained one analyst. The Nigerian rental market was notably active last year, with rents rising by over 50 percent in some areas, particularly outside urban centers.

Key Drivers of Rental Demand
Unemployment is another major factor driving the demand for rental accommodation in urban areas. Despite a slight decline in joblessness in 2024, analysts predict a potential rise in unemployment in 2025, further bolstering the rental market. For those fortunate enough to maintain steady jobs, securing mortgages to purchase homes remains challenging, leaving renting as the predominant option.

In Lagos, Nigeria’s commercial hub, heightened rental activity is driven by its growing population and urbanization. With an estimated population of 20 million, Lagos attracts thousands of new residents daily, drawn by job opportunities and economic prospects. This influx has put immense pressure on the housing market, where approximately 80 percent of residents are renters, according to the state’s housing commissioner, Moruf Akinderu-Fatai.

While the rental market presents challenges for residents, Akinderu-Fatai sees investment opportunities for private developers to collaborate with the government to address the housing shortage.

Abuja, Nigeria’s federal capital, is also expected to see rentals leading the market in 2025. Although federal initiatives have aimed to increase affordable housing, the city’s expanding population continues to strain the housing supply.

Despite notable construction booms in Abuja in 2023 and 2024, including new housing estates and apartment complexes, residents argue that oversupply has not significantly reduced rents or home prices, even in the suburbs.

A Mixed Outlook for 2025
While rental properties are expected to dominate transactions, the Nigerian real estate sector holds opportunities for both sales and rental markets. Wale Akinola, CEO of Earthbound Real Estate, emphasizes the sector’s potential for investors and developers.

“With government-backed initiatives, rising urbanization, technological advancements, and growing interest from local and diaspora investors, the sector is primed for unprecedented returns. As the country strives to bridge its housing deficit of over 20 million units, 2025 will be pivotal for long-term growth and wealth creation,” Akinola stated.

As Nigeria navigates economic challenges, the real estate market is set to remain a critical investment frontier, with rentals taking center stage in shaping the housing landscape.

Source: Businessday Newspaper Nigeria