Is 2025 a good time to buy real estate in Nigeria?

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Everything you need to know is included in our Nigeria Property Pack

Are you considering buying real estate in the land of Nollywood? Are you pondering if it's the right time to make a move?

People hold diverse opinions regarding market timing. Your Nigerian colleague might suggest that now is a perfect time to invest in property, whereas your spouse, who is originally from Lagos, might have a different view and recommend waiting for more stability.

At TheAfricanvestor, when we create articles or update our pack of documents related to the real estate market in Nigeria, we use verifiable facts and concrete data, not just subjective opinions.

We have carefully studied official reports and statistics from government websites, and we now have a trustworthy database with important information. Here's what we discovered, which can help you decide if it's a good idea to purchase real estate in Nigeria.

Enjoy your reading!

How is the property market in Nigeria these days?

Nigeria is, today, not a stable country

Negative

Stability should be the first thing you look at when you want to invest in real estate because it promotes property ownership, rental demand, and sustainable growth. It is an information you need as a foreigner looking to buy a property in Nigeria.

Regrettably, Nigeria is currently in an unstable state. The last Fragile State Index reported for this country is 96.6, which puts it in the bottom 20 globally.

Nigeria's instability is largely due to persistent ethnic and religious tensions, exacerbated by the activities of militant groups like Boko Haram in the northeast and ongoing conflicts between herders and farmers in the Middle Belt. Additionally, widespread corruption and economic disparities have undermined governance and fueled public discontent, further destabilizing the nation.

First check is not great. Let's review more data.

Nigeria is poised for strong growth

Positive

Second thing to do before investing in Real Estate: evaluate the country's economic performance.

As projected by the IMF, Nigeria will, in 2024, grow by 3.3%, which indicates the country is heaidng in the right direction. If we take 2025, the consensus estimate is 3%.

Besides that, the economy will keep growing since Nigeria's economy is expected to increase by 14.3% during the next 5 years, resulting in an average GDP growth rate of 2.9%.

The expected sustainable growth rate in Nigeria indicates a stable and expanding economy, which can lead to increased demand for housing and commercial properties. This growth can drive up property values and rental income, making real estate investment potentially more profitable.

Nonetheless, there are other indicators to watch.

Nigerian business owners are steadily increasing their trust in the economy

Positive

While the GDP forecast is a valuable indicator, it is derived from external sources and may not fully reflect the local sentiment in Nigeria. Thankfully, in Nigeria there is an official metric that is consistently updated. We're lucky because this isn't true for every country.

The Business Consumer Index (BCI) is a metric derived from surveys and assessments of business leaders, indicating their confidence in the current and future economic conditions.

The Global Economy's data indicates that the Business Confidence Index is currently 1 for Nigeria. It is definitely a small score.

If we look at the data, however, we can see some positive signs. It's going up: the BCI score, 12 months ago, was -34.

With the Business Confidence Index at a minimal level in Nigeria, local businesses are experiencing a lack of confidence, which can lead to a stagnant property market characterized by limited investment and development. As a result, buyers may encounter fewer available properties and face difficulties in finding quality real estate options.

Nigeria's population is growing but getting poorer

Negative

It's vital to take population growth and GDP per capita into account before purchasing real estate because:

• a growing population means more people needing homes
• a higher GDP per person means people have more money to spend on housing (which can lead to increased property value over time)

In Nigeria, the average GDP per capita has changed by -2.5% over the last 5 years. It's an alarming number. However, the Nigerian population is growing (+17% in 5 years).

You'll get the best rental yields in Nigeria

Positive

To determine the profitability of a property investment, look at the expected rental yields.

It represents the annual rental income generated by a property divided by its purchase price or market value. For instance, if a property in Nigeria is purchased for 10,000,000 NGN and generates 600,000 NGN in annual rental income, the rental yield would be 6%.

According to Numbeo, rental properties in Nigeria offer gross rental yields ranging from 14.3% and 17.0%. You can find a more detailed analysis (by property and areas) in our pack of documents related to the real estate market in Nigeria.

These values are exceptional.

Everything you need to know is included in our Nigeria Property Pack

In Nigeria, inflation is expected to be minimal

Neutral

In two words, inflation is when prices go up.

It's when your customary plate of jollof rice costs 1,500 Nigerian naira instead of 1,200 Nigerian naira a couple of years ago.

If you're contemplating investing in a property, high inflation can bring you several benefits:

• Property values tend to increase over time, leading to potential capital appreciation.
• Inflation can result in higher rental rates, thereby boosting cash flow from the property.
• Inflation reduces the real value of debt, making mortgage payments more affordable.
• Real estate can act as a hedge against inflation, preserving the value of the investment.
• Diversifying into real estate provides stability during inflationary periods.
• Tax advantages, such as depreciation deductions, can help offset the impact of inflation.

In accordance with IMF projections, over the next 5 years, Nigeria will have an inflation rate of 1.0%, which gives us an average yearly increase of 0.2%.

This data is suggesting that Nigeria will likely experience almost no inflation. If you buy a property now, you may experience lower appreciation potential and reduced returns on investment.

Nigeria's currency is currently very low

Positive

If you're a foreign investor, you might find this relevant.

The Nigerian Naira (NGN) is greatly devalued: the currency is currently 40-44% over the past five years.

As a foreign investor, purchasing property in Nigeria while the currency is low could offer a cost advantage, allowing you to acquire assets at a relatively cheaper price compared to when the currency is stronger. However, it's crucial to consider the potential risks, such as currency volatility, political instability, and economic challenges, which could impact the property's value and your investment returns. Conducting thorough market research and seeking local expertise can help mitigate these risks and inform a more strategic investment decision.

Is it a good time to buy real estate in Nigeria then?

Time to conclude !

When considering whether 2025 might be a good time to buy property in Nigeria, it's important to first acknowledge the current instability in the country. Political and social unrest can create an unpredictable environment for property investment. This instability can affect property values and the overall real estate market, making it a risky venture for potential buyers. Even with economic growth, the lack of stability might deter investors who are looking for a more secure investment climate.

On the economic front, Nigeria's economy is projected to grow by 14.3% over the next five years, with an average GDP growth rate of 2.9%. While this suggests a stable and expanding economy, which typically boosts demand for housing and commercial properties, the benefits might not be evenly distributed. The growth could lead to increased property values and rental income, making real estate investment seem attractive. However, the underlying instability could still pose significant risks, potentially offsetting these economic advantages.

Another factor to consider is Nigeria's growing population, which, paradoxically, is also getting poorer. This demographic trend could lead to increased demand for affordable housing, but it might not translate into higher property values or rental income if the population cannot afford rising costs. While the demand for housing might increase, the purchasing power of the average Nigerian could limit the potential for profitable real estate investments.

Despite the promising rental yields reported by sources like Numbeo, which range from 14.3% to 17.0%, the overall economic environment might not be as favorable as it seems. Even with minimal expected inflation, the combination of political instability, uneven economic growth, and a population facing financial challenges could make 2025 a less than ideal time to invest in Nigerian real estate. Potential investors should weigh these factors carefully and consider whether the potential rewards outweigh the risks.

We wish this article has been of help!. If you need to know more, you can check our our pack of documents related to the real estate market in Nigeria.

This article is for informational purposes only and should not be considered financial advice. Readers are advised to consult with a qualified professional before making any investment decisions. We do not assume any liability for actions taken based on the information provided.