Dateline: Lagos, Nigeria
Nigeria probably isn’t the first country that comes to mind when searching for a lucrative foreign real estate market.
It is, however, a market with a lot of recent growth and there’s good reason to think this trend will continue. Ever since the beginning of the new millennium, Africa’s economy has been steadily growing with Nigeria as its biggest contributor.
The continent of Africa has shown an average yearly growth of 5% for the last years. This can be attributed to the oil industry for a big part but industries like agriculture, construction, and manufacturing also contributed significantly.
The growth of Africa’s population
According to projections made by the United Nations, the African population will increase significantly. The population will be growing at such a high rate that 40% of the total world population will be living in Africa in the year 2100.
The reason for this fast growth is the very high fertility rate in this area. The average African woman gives birth to 5 children.
The sub-Saharan areas of Africa are expected to have the fastest-growing population in the world. It’s expected that Nigeria will have a population of over 1 billion people, before the end of this millennium.
The opportunities of Nigeria’s economy
Nigeria has Africa’s strongest and most important economy. The demand for housing in Nigeria is so big that more than 700,000 new housing units are needed every year, to keep up with the growing population. This opens up a lot of possibilities for people looking to make a profitable real estate investment.
The housing demand is caused mostly by the large amount of young professional people in Nigeria, who want to enter the real estate market. In Nigeria, the median age is 18.2 years and half of the population is less than 18 years old. This should all but guarantee a strong demand for houses for many years to come.
What about Nigeria’s rental market?
The rental market is the most attractive real estate market to invest in. A research done by a real estate research company in Nigeria has shown that about 60% of the working population in Nigeria’s capital of Lagos, rents some form of real estate.
Renting is popular because the houses are too expensive for most people. It’s also hard to get a mortgage at a favorable rate.
It’s very inviting to rent out property in Nigeria as landlords here have a strong position. It’s very common for rent contracts to be paid 1 to 3 years in advance.
When the renter leaves the house before the rent period is finished, there will not be any refunds. This reduces the risks that are involved with renting out property.
Increasing demand for shopping malls in Nigeria
As Nigeria’s population is growing and has more money to spend than before, the need for state of the art shopping malls is increasing. The amount of shopping malls in Nigeria is on the low side if you compare it with the number of people living here and the future potential.
Because the middle class in Nigeria has more money to spend, modern retail development is on the rise here. The new generation also tends to be more ‘westernized’ which makes this kind of real estate more popular.
Profits from investing in Nigeria real estate
To get an insight into the Nigerian real estate market’s performance of the coming years, it’s interesting to take a look at research done by Agusto & Co, a provider of industry research focused on Nigeria.
This research has led to a report with predictions. Agusto & Co predicts a 10% growth in the commercial property and residential market throughout 2015.
The residential and commercial markets have not shown any signs of decline. The fastest growth has been happening in terms of population, economy, urbanization, and consumer’s disposable income.
Another interesting result from this report is that Lagos makes up 40% of the entire Nigerian market. For a country that’s bigger in size than France, this shows very clearly what the impact of Lagos is on the rest of the country.
Difficulties entering Nigeria’s real estate market
Although there are not many rules against foreigners owning property in Nigeria, there are some things that could make it difficult.
First of all, it’s expensive to register property in Nigeria. Construction costs can also be higher than in western countries. Nigerian building companies are just not up to the level of those in well-developed countries, so it will be more costly if you want your real estate properly constructed.
Interest rates on mortgage loans are very high in Nigeria. It’s not uncommon for banks to ask for a 20% yearly interest rate, which makes it very difficult for people in the lower and middle classes to buy a house. This is why most people only have the option of renting.
There are some schemes set up by the government to make it possible for people to loan money at more affordable rates, but this is only available to a small group of people.
There are some things to keep in mind when investing in a country like Nigeria. Although it is developing at a fast pace, there’s still a lot of progress to be made.
For example, the extreme poverty in the country leads to a lot of corruption, all the way up to the police and government level. If that’s not enough, terrorist organizations like Boko Haram are causing a lot of mayhem to society and eventually to the country’s economy.
Because the level of corruption is so high, you have to be careful who you do business with. Many real estate brokers will lie or hold back information about certain real estate’s profitability.
It would be well advised to do a lot of research and ask around at a lot of real estate agencies before making any investments. Because the Nigerian culture – as with other local cultures – is much different from those of countries outside of Africa, you could make use of a local assistant.