Jul 23, 2025 (Leadership/All Africa Global Media via COMTEX) --
The hike in the cost of building materials is pushing up mortgage and construction loans in the first half of the current year, LEADERSHIP has learnt.
A significant portion of residents in the country are currently allocating about 60 percent of their income towards rent payment which sheds light on the deepening housing crisis in the country.
The severity of rental pressure has put household finances, disposable income and family budgets on a knife edge as high rental cost continues to erode monthly income, future savings, construction loan cost and mortgage payment on lease homes.
The Monetary Policy Rate (MPR) in the country has remained elevated at 27.5 per cent, and has significantly pushed up mortgage and construction loan costs, which has further tightened liquidity reserves, and further creating cash and Forex glitches for estate developers in the country.
Stakeholders believe that high construction costs, FX volatility, and tight access to financing will cause some developers to slow down or phase their projects. However, those with access to off-take guarantees or joint ventures may continue to build.
Amid the mounting pressure on rental growth, inflation and high interest rates, the real sector closed the first half of 2025 with a deepening housing deficit that continues to displace homeownership ambitions.
Nigeria's real estate market witnessed a turbulent but active first half in 2025, with inflationary pressures, high construction costs, and limited mortgage access which continues to define the housing landscape.
Findings from LEADERSHIP reveals that high rental growth now dominates rental space in major cities like Lagos, Delta, Oyo, Ogun, Abuja, and Port Harcourt, as affordability challenges continue to push potential homebuyers to the sideline of suburban housing.
The market's activity level remained high, particularly in urban fringe areas and luxury developments, but analysts caution that rising inflation, hovering above 22.97 per cent, and skyrocketing building material prices are stretching developers and tenants.
Nigeria's housing deficit is now estimated at over 28 million units, yet the country produces fewer than 700,000 homes yearly. This imbalance has led to skyrocketing rents, particularly in Lagos, where a standard one-bedroom apartment in the Lekki-Ajah axis now commands N2.2 million yearly, almost twice the average urban income of N1.2 million.
Data from estate platforms shows that over 80 per cent of Lagos residents now live in rented accommodation. With home financing almost inaccessible due to high interest rates as many first-time buyers are priced out of ownership.
To arrest the situation, the federal government launched a N1 trillion housing fund (MREIF) in Q1 2025, offering off-take guarantees and 12 per cent mortgages over 20 years, bolstering developer confidence and supporting end-buyers, especially low-income housing.
However, implementation has been slow, with industry players calling for faster disbursement, regulatory clarity, and partnerships with credible developers.
During the period, cities with high growth areas include Lagos (Epe, Ibeju-Lekki Epe, Sangotedo). These areas continue to attract massive investment due to infrastructure projects like the Lekki Deep Sea Port, Dangote Refinery, and the new Lagos International Airport.
Also, Lugbe, Gwarinpa and Lokogoma in Abuja are becoming attractive as these suburbs are experiencing strong residential growth, driven by demand for more affordable housing close to the city centre.
Among areas with stable or declining areas are high-end parts of Ikoyi and Victoria Island, while some parts in the premium areas have seen slower sales and rental turnovers due to oversupply and high service costs. In Abuja Central Business District (CBD), commercial occupancy rates are under pressure as businesses downsize or relocate due to high operational costs.
For instance, Lagos and Ogun States are expanding housing schemes in Ibeju-Lekki, Agbara, and Badagry corridors.
The emerging market for residential housing in the country are; Ogun State, Sango, Ikorodu, Epe, Ibadan, Sagamu, Mowe and Arepo corridors which are notable for gaining investors interest due to lower cost of land prices, ground rent and cheap accommodations.
Checks by LEADERSHIP reveal that more developers are targeting the segment with smaller-unit designs (one and two-bedroom apartments), flexible payment plans, and rent-to-own options. However, despite high demand, supply still lags, largely due to rising construction costs and limited access to affordable financing
Industry watchers expect more pressure on the rental market, especially, with continued urban migration. Focus will likely shift to mid-income housing, digitised property services, and more institutional funding.
Speaking on the development, the chairman, Association of Capital Market Valuers (ACMV), Chudi Ubosi, explained that the market in the first half of the year had witnessed a continued increase in rental and capital values nationwide.
"This confirms the maxim that real estate is always the last to reflect inflationary trends. Values have been moving up tremendously in line with the devaluation of the currency and other measures introduced by the government, which has driven inflation to over 30 per cent per year, he added.
According to him, the major trend is quantum leaps in the values of real estate. "Rental and capital values have gone through the roof for properties. Inflation has given or caused a quantum increase in capital and rental values of real estate to the point that clients are reconsidering investments in real estate, whilst others have put a hold on their development.
"For rented houses, we are seeing more defaults as tenants cannot keep up with the new rents being asked. In the same vein, we are seeing higher values for real estate and other assets when we update their portfolio values."
Ubosi, a past president of the Africa Chapter of the International Real Estate Federation (FIABCI), revealed that, developers are increasing asking prices for their project and selling more of their projects off-plan to raise money for construction rather than take a facility from the financial institutions, while agents are also taking cuts on their professional fees as clients are pressed to the wall in terms of real estate transactions.
He said, buyers and renters are concerned about the galloping prices for rent and acquisition. Ubosi is in doubt if the N1 trillion MREIF funds would have far-reaching effects, as implementation of policies has always been the bane of the public service.
Also, the immediate past chairman, NIESV Lagos branch, Mr Gbenga Ismail said, demand in the mid-income and affordable housing segments remains robust, particularly in Lagos' peripheries and Abuja fringes.
"However, purchasing power is eroding. Renters are facing higher monthly costs, and buyers are increasingly unable to convert intent into transactions due to inflation, interest rates, and limited mortgage access," he said.
Also speaking, Architect, Estate developer, Babatunde Olawale Babz said, despite economic pressures like inflation and undulating exchange rates, there was steady demand for residential and short-let properties in the hospitality management sector.
He added that, developers are leaning towards the FX glitches and monetary policy adjustments which has impacted the growth of construction activities and impacted the accessibility of construction loans across the sector.
The immediate past director, School of Environmental Studies at Moshood Abiola Polytechnic said, the first half of the year recorded a surge in off-plan sales, a rental market boom, smart and eco-friendly developments, flexible workspaces and co-living, as well as diaspora investment growth, noting that, 'buyers are also attracted by relatively lower prices compared to completed properties.'
For his part, CEO of Greenchell Homes and Property Ezekiel Oke noted that high construction costs and inflation have pushed more people toward renting adding that "Short-let apartments remain profitable, especially in Lagos, Portharcourt and Abuja while long-term rentals are in high default states due to rental adjustments.
COMTEX_467503207/2029/2025-07-23T06:31:10
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