Why real estate in Lagos, other cities remains pricey

Real estate market dynamics such as construction cost, land, finance, government policies and taxes have led to overpriced prices in major cities in the country. Experts advised the government to regulate prices, introduce policies to curb speculative investments and ensure affordability, and CHINEDUM UWAEGBULAM reports.

After more than two years of inflationary trends in the housing market, property in Lagos and two other cities are now the most overpriced in the country, according to The Guardian findings.

The National Bureau of Statistics (NBS) reported that Nigeria’s headline inflation rate eased to 23.18 per cent in February 2025, down from 24.48 per cent in January. Food inflation, a key driver of the headline rate, stood at 23.51 per cent year-on-year in February, compared to 26.08 per cent the previous month.

The NBS rebased its Consumer Price Index (CPI) to reflect changes in consumption patterns, which may have contributed to the inflation rate. The headline inflation rate was down from 31.7 per cent a year earlier.

Besides, the Central Bank of Nigeria (CBN) in February maintained the Monetary Policy Rate (MPR) at 27.50 per cent. The CBN expects inflation to moderate ahead thanks to greater naira stability and a softening in fuel prices but acknowledged the risk of persistent inflationary pressures, mainly relating to food prices.

The development has not influenced the real estate market as interest rates and property and rental prices remained high. The Guardian learnt that there are more buyers in the market than available properties, especially for low-to-moderate-income buyers looking to get a slice of the homeownership pie. This creates a seller’s market, which tends to keep prices high.

Nigeria has a supply issue regarding affordable homes. At the same time, available houses in Lagos, Abuja, and Port Harcourt are 80 per cent overpriced compared to their long-term pricing trends, and more than a half of listings in the country have been on the market for 180 days or more without a buyer because it’s not fairly priced, experts revealed last week.

In Lagos, real estate is overpriced in the highbrow areas of Banana Island, Ikoyi, Victoria Island, and Lekki, as well as other locations in the metropolis. This is not unique to Nigeria; the trend is also happening in Accra, Dubai, Nairobi, Johannesburg and Cape Town.

In many parts of Lagos, real estate prices are high due to limited land availability and high demand in prime areas, rising construction costs, and speculation, leading to potential overpricing, especially for properties with modern amenities.

However, affordability remains a major issue in many major housing markets. Other factors include limited home supply, urbanisation trends, and inadequate infrastructure such as limited roads, drainage, and stable power supply, as well as bureaucratic processes like lengthy land acquisition and registration procedures.

Among the factors contributing to the expensive housing market are the cost of imported materials, labour, building approvals and planning permits, which add to expenses that automatically affect cost and pricing of housing, speculative investments as wealthy investors often buy land and landed properties for hoarding and resale, thereby driving prices up artificially.

The Chairman of the Professional Practice Committee, Estate Surveyor and Valuers Registration Board of Nigeria (ESVARBON), Stephen Jagun, agreed that real estate in Lagos is overpriced within the high-brow areas.

He blamed it on scarcity of land, which drives the cost of acquisition up, speculation and foreign investment interest in the locations, lack of infrastructure, which drive demand to the few developed areas, high construction cost, and currency devaluation that push developers to hedge with increasing prices.

To navigate the market, Jagun advised investors to focus on emerging areas rather than overpriced locations and partner with local developers to reduce costs and gain market insights.

He urged developers to use cost-effective building materials and sustainable construction methods, as well as called on the government to engage in land policy reforms, collaboration on affordable housing initiatives, and opening new areas with infrastructural development.

“They can also partner with government on affordable housing projects. Buyers can look at off-plan options with credible developers. Forming cooperative housing groups could also help them leverage on the power of collective bargain,” Jagun added.

For Mr Olufemi Oyedele, an estate surveyor and valuer, real estate is overpriced in some parts of Nigeria, especially in Lagos State, FCT, Rivers State and Ogun State.

According to him, when products or goods are overpriced, they attract low patronage as prospective customers cannot afford their prices. “With about 100 million people not adequately accommodated in Nigeria and with over five million properties that are completed across various residential estates, and with various lands for sale without buyers, it can just be concluded that the real estate products are overpriced.

“In property markets, when there are supplies of basic needs of man without demand, there can only be two reasons: either the market is saturated or the products are overpriced and people cannot match them with their purchasing power,” Oyedele said.

He enumerated factors contributing to overpriced real estate in Nigeria as high cost of building materials, especially cement and roofing sheets; high dependence on foreign materials, low employment rate, lack of patronage of cheaper alternative building materials, lack of laws on completed but abandoned properties and lack of efficient mortgage system.

He said, “We have painstakingly researched and found out that the Housing Affordability Index (HIA) of one bedroom flat in Ikeja, Lagos State, is N17.5 million, N6.5 million in Abeokuta, Ogun State and N13.5 million in Abuja. These are the prices that people are ready to pay for one-bedroom flats in these locations, according to research. Developers must construct houses that people can afford.

“The government should make laws on abandoned properties and ensure that nobody can start construction without a financier. Anybody or group that wants to build a house must first secure the backing of a mortgage bank as a financier of the project.

“The financiers will provide finance either it is the equity of the homeowner or as loan or a mix of the two. The government must also be ready to construct social housing for those who cannot build houses by themselves as housing is a right as recognised in international treaties and declarations.”

The President of the African Real Estate Society (AFRES), Mr Kunle Awolaja, who confirmed the development, said, “Prices often do not align with average income levels, making homeownership difficult for many residents.

“This trend is also seen in other major cities such as Abuja (Nigeria), Nairobi (Kenya), Accra (Ghana), Johannesburg (South Africa), and sometimes visible in luxurious cities like Dubai in the United Arab Emirates (UAE), Monaco in France, London in the United Kingdom (UK), New York City in the United States of America (USA), amongst others.”

Awolaja urged investors to focus on emerging areas with growth potential rather than overpriced city centres, adopt affordable housing models and explore alternative construction materials to cut costs. They should consider financing options like mortgages, co-ownership, and real estate cooperatives to manage costs.

He wants governments to regulate prices, introduce policies to curb speculative investments and ensure affordability, and provide more affordable housing. “The government should endeavour to develop more social housing schemes and incentivise developers to build more affordable housing units.”

According to him, the government should endeavour to make plans towards provision of good roads, expand and repair old roads, water, and electricity to ease pressure on prime locations, streamline land acquisition and property registration to reduce costs and delays, as well as offer low-interest mortgages and tax incentives for affordable housing projects.

Source: Guardian.ng