After a boom period marked by high oil prices and double-digit growth, Nigeria’s real estate sector was significantly impacted by the country’s economic downturn, with growth dropping off in 2015 and 2016, and remaining subdued in 2017 and early 2018. With some high-end office and residential projects stalled, developers are increasingly turning their attention towards smaller and more affordable projects, which should benefit from ongoing government efforts to grow the country’s mortgage market and reduce its housing deficit. Planned fundraising activities at the Nigeria Mortgage Refinance Company (NMRC) should help support commercial bank lending, while the federal government’s plans to restructure and recapitalise the Federal Mortgage Bank of Nigeria (FMBN) should also see home ownership expand significantly in coming years. These efforts should keep the sector on a slower but more stable growth trajectory in 2018. At the same time, prevailing macroeconomic conditions continue to offer a silver lining to residential and office tenants, with landlords lowering their rental rates and offering new incentives to attract and retain tenants.

Recent Performance

Nigeria’s real estate trajectory has risen and fallen with international oil markets. Local consultancy Estate Intel cited data from the National Bureau of Statistics (NBS), showing that in nominal terms, real estate GDP growth rose from 15.1% in the first quarter of 2013, peaking at 24.14% in the second quarter of 2013, with full-year real GDP growth hitting 20.49% in 2013. As Brent crude prices peaked at $115 per barrel and then began to slide in mid-2014, real estate growth was also checked, falling from 22.34% in nominal terms in the first quarter of 2014 to 10% in the second quarter of 2014, with full-year growth hitting 12.5% in 2014. Nominal growth fell to 9.18% in the third quarter of 2015 and to 8.27% in the last three months of 2015, with full-year growth standing at 9.52% in 2015, before dropping sharply to 0.61% in the first quarter of 2016, as the price of Brent crude sunk to less than $30 per barrel. Nominal growth averaged 1.76% in the first nine months of 2016.


In real terms, the sector’s growth trajectory has shown a steeper decline, falling from a peak of 15.86% in the second quarter of 2013, and ending the year with growth of 11.98%. Real sector growth fell to 5.12% in 2014 and 2.11% in 2015, according to Estate Intel, before contracting by 4.69%, 5.27%, and 7.37% in the first, second and third quarters of 2016, respectively. Real estate consultancy MCORE reports that the real estate services sector contracted by 8.38% in nominal terms in the first quarter of 2018, 18.94% less than the growth rate in the first quarter of 2017, and 5.03% lower than in the final quarter of 2017. The bureau reports that real estate’s contribution to GDP in nominal terms was 5.87% in the first quarter of 2018, against 7.67% in the fourth quarter of 2017. In real terms, the sector contracted by 9.4% in the first quarter of 2018, a 3.48% decline from the fourth quarter of 2017. The sector contributed 5.63% to real GDP growth in the first quarter of 2018, against 6.34% in the first quarter of 2017 and 7.03% in the fourth quarter of 2017.

Residential Rental

In its Nigeria Real Estate Market Outlook 2018 report, local property company Northcourt Real Estate said that the 2012-14 boom period had brought residential real estate prices to “perhaps irrational” levels, with the 2016 recession offering a necessary market correction, with prices, yields and other performance indicators corrected in 2017. Residential vacancy rates in Lagos averaged 11% in 2017, down from 15.57% in the first half of 2017, and 32.87% at the end of 2016. Vacancy rates in Abuja averaged 7% in 2017, down from 9.5% in the first half of 2017 and 25.57% at the end of 2016. The firm also reports that developers are resuming work on developments that stalled during the recession, while residential supply in the Ikeja Government Reserved Area (GRA) began to decline, in part because some units were converted into office spaces, while others were sold or leased. Landowners are increasingly forming joint ventures with developers in an effort to maximise their property value. “In Abuja, there are a lot of districts where real estate has outpaced the construction of urban infrastructure, which has resulted in a lot of completed housing without amenities. These plots are a great opportunity for developers who take a more holistic approach,” Eli Goldhar, managing director of Gilmor Engineering, told OBG.

In addition, the oil and gas sector has remained below its former earning capacities, limiting growth in long-term luxury leasing. As a result, landlords and property owners were more flexible with leasing terms to retain existing tenants, with Northcourt Real Esate reporting rental reductions of up to 25%. Properties in the Ikeja GRA were also offered more flexible lease terms, both in terms of amounts paid and the length of stay.

Office Market

The office rental market has not recovered at the same pace as its residential counterpart, with MCORE reporting that Lagos’ commercial office market’s occupancy rate remained low in the first quarter of 2018, averaging around 50% as a result of oversupply and weak economic growth. “While enquiries from prospective office tenants have increased since the beginning of 2018, the high vacancy levels resulting from the recession have prevented rental increases,” Bolaji Edu, CEO of real estate firm Broll, told OBG. Noting that rents have stabilised since crashing in 2016 and 2017, MCORE reports that demand pressures will nonetheless be neutralised by new spaces in the market in 2018 and 2019, including the Kingsway Tower, with 13,317 sq metres of gross leasable area (GLA); Alliance Place, with 6670 sq metres of GLA; Madina Tower, with 8300 sq metres of GLA; and Cornerstone Tower, with 12,000 sq metres of GLA.

Total supply is forecast to increase by 64,000 sq metres, or 12% of existing stock before 2020, according to MCORE. Rental prices for grade-A office spac has by 20% since 2015 to average $750 per sq metre, while rent for grade-B offices averaged $400 per sq metre in the first quarter of 2018.

Meanwhile, Northcourt Real Estate reports that the office market recorded significantly more activity in 2017, despite delays to major projects including Eko Tower II and Desiderata, with rent for grade-A office space ranging between $500 and $800 per sq metre, against a price point of around $1000 per sq metre in 2015 and 2016. As with the residential and retail sectors, office landlords have also offered incentives to tenants including rent-free periods, flexible lease payments, fit-outs and soft furnishing, oversupply remains a challenge. In the hospitality segment security issues remain the main challenge. However, with rental prices forecast to stabilise in the coming quarters, office rental incentives will likely diminish moving into 2019.

Residential Sales

Lagos-based real estate research company Residential Auctions Company (RAC) reported that Lagos’ housing market has begun to show signs of economic recovery. According to the company, the Lagos Island market was hit hardest by the recession, with prices contracting by 24.77% in 2015 and 5.58% in 2016. In 2017 the average asking price of a four- or five-bedroom single family unit on Lagos Island rose by 13.84%, reaching N196.1m ($634,000), up from N172.2m ($557,000) in 2016, which the RAC attributed to the effect of the weakening of the naira, on new house prices across Ikoyi, Victoria Island and Lekki Phase 1. Prices climbed most steeply in Victoria Island, rising by 30% in 2017, with the RAC attributing this to unoccupied secondary homes on major streets, as well as ongoing development at the Eko Atlantic project. The project’s 15-storey Afren Tower received its first tenant in August 2017.

The RAC reports that unlike Lagos Island, the Lagos mainland market continued to grow despite the recession, with asking prices rising by 20.43% and 2.33% in 2015 and 2016, respectively. This trend slowed in 2017, with asking prices for houses growing by just 0.53%, hitting N75.9m ($245,000), against N75.5m ($244,000) in 2016. The RAC reports that new supply has been significantly lower on the mainland than Lagos Island, with the areas of Anthony Village and Gbagada recording the highest growth in asking prices, rising by 29.4% and 24.09%, respectively, as supply shrank throughout 2017. In contrast, prices in Ilupeju and Omole Phase 1 fell by 18.8% and 14.01%, respectively, in 2017 as supply rose.

Housing Deficit

The World Bank estimated that Nigeria’s housing deficit stood at 17m units as of 2013. Given the country’s current urbanisation trends – with Nigeria set to be the world’s third-most-populous country in the world by 2050 and the population of Lagos forecast to double over the same period, according to UN growth projections, while the demand for housing rises by some 700,000 units per annum. However, the current levels of development add around 100,000 units annually. “On the residential side, the main priority for Nigeria is affordable housing to accommodate the needs of its growing middle class,” Erejuwa Gbadebo, CEO of IREP, told OBG. According to data from the Centre for Affordable Housing, the country will require $360bn to close its housing deficit, with Lagos State alone estimated to have a housing shortfall of more than 3m units, which would cost N8trn ($25.9bn) to eliminate, assuming a cost of $10,000 per unit.

Multiple federal and state-level initiatives have been undertaken to address Nigeria’s housing deficit, including the launch of an ambitious plan in 2016 to build 5000 housing units in all 36 states for civil servants under a public-private partnership framework. The three-year iniative has had limited success, however, with just 2736 new units built as of August 2017. In June 2018 the Federal Housing Authority reported that it had invested N1trn ($3.2bn) in new housing projects in the country over the previous 45 years. Nevertheless, demand continues to outstrip supply, with the government now moving to boost financing and mortgage lending in order to address the crisis. “Nigeria’s housing sector needs better projects and public money disbursement supervision, along with accessible mortgage financing and a better dialogue between private parties and public agencies,” Becky Oke, managing director of Bstan Group, told OBG.

Created in 2013, the NMRC is the country’s state-backed mortgage guarantor, focusing mainly on providing loans to banks to support affordable mortgages. The NMRC partnered with the Lagos State government in October 2017 and with private firm Modern Shelter in January 2018 to support financing for the company’s 5000 new homes planned for construction across the country. In March 2018 the NMRC announced plans to issue N11bn ($35.6bn) worth of 15-year bonds through multiple sales, as part of its five-year, N440bn ($1.4bn) fundraising programme. The company estimates Nigeria’s housing demand is rising by 780,000 units annually, even higher than the World Bank’s projected 700,000, making mortgage market expansion a priority.

Mortgage Market

Mortgage penetration is rising rapidly in Nigeria, but there is plenty of room for growth. In February 2018, the Mortgage Banking Association of Nigeria (MBAN) reported that Nigeria’s mortgage finance market grew by 82% between 2010 and 2016, hitting N518.8bn ($1.7bn) in 2016, against N348.1bn ($1.1bn) in 2012 and N28.4 ($91.9m) in 2010. According to MBAN data, there were fewer than 100,000 mortgage transactions recorded in Nigeria between 1960 and 2009, with mortgage growth accelerating rapidly to total 181,519 transactions between 2010 and 2016. At the same time, mortgage penetration remains comparatively low, with MBAN reporting that Nigeria’s mortgage debt-to-GDP ratio is less than 1%, while less than 5% of 13.7m registered housing units have been financed with mortgages. The association attributes this to land acquisition challenges, including a dearth of titled properties, as well as relatively high levels of non-performing loans in the mortgage segment. The Nigeria Deposit Insurance Corporation reports that 55% of the country’s N94bn ($303.9m) loan portfolio was considered non-performing in 2017. This has pushed commercial mortgage lending rates to average between 20% and 24%, according to the MBAN. Bloomberg echoed these statements in June 2018, reporting that land acquisition challenges, poverty and high commercial bank lending rates have constrained mortgage market growth, with the firm saying there were just 50,000 registered mortgages in the country.

Federal Mortgage Bank

Lending support is also offered via the FMBN, which is slated for significant recapitalisation in order to boost mortgage transaction forty-fold over the coming years. The FMBN was established in 1956 as the Nigerian Building Society, before being nationalised in 1973. Restructured into a federal government-sponsored enterprise in the 2000s, the bank has since expanded its operations from funding for Social housing under the National Housing Fund, which lends to low- and middle-income Nigerians building, purchasing or renovating homes to commercial lending, mortgage refinancing, mortgage purchasing and warehousing, and mortgage-backed securitisation. FMBN authorities report the bank is significantly undercapitalised, which has constrained lending activities. Bloomberg reports the bank accounted for just 18,200 registered mortgages as of June 2018.

In January 2017 the bank announced it had signed a $2bn tripartite memorandum of understanding with the Real Estate Developers Association of Nigeria and housing finance agency Shelter Afrique, which will see the latter provide financing for affordable housing. The federal government is also taking steps to support FMBN activities, announcing plans in June 2018 to allocate N500bn ($1.6bn) to the FMBN over the next five years. The FNBN hopes to boost capital from current levels of N5bn ($16.2m) at a rate of N100bn ($323.3m) annually. Bloomberg reported that the bank is expecting proposals regarding its recapitalisation and planned reorganisation by the end of 2018, with plans to boost annual activities from 2500 new mortgages to 100,000 by 2020. As part of this initiative, the bank launched a 3000-unit housing project that will provide financing under a rent-to-own programme in August 2018.


Although the sector has been affected by the recession, real estate is set to stabilise in 2018 as markets absorb new supply, and macroeconomic indicators improve. The 2018 budget boosted public spending by 16% from 2017 levels, with a significant portion of funding channelled into new projects under the Federal Ministry of Power, Works and Housing, as well as the Federal Ministry of Transportation. GDP growth is forecast to hit between 2.1% and 3.5% in 2018, which should support further real estate stabilisation, while population and urbanisation trends are expected to sustain steady mid- and long-term industry expansion.