The Rising Cost Of Real Estate In Nigeria: Why property values keep climbing by ESV. Idowu Temitope Grace

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The Nigerian real estate market has witnessed significant increases in property prices and rents in recent years. From Lagos to Abuja, Port Harcourt, Ibadan and other major urban centres, property owners, investors and occupiers are confronted with a market where the cost of acquiring, developing, managing and occupying property continues to rise.

The question frequently asked is: Why are property values increasing so rapidly?

There is no single answer. The increase is driven by several interconnected economic and market factors, including inflation, rising construction costs, exchange-rate fluctuations, scarcity of developable land in prime locations, increasing infrastructure and financing costs, and growing demand for accommodation.

THE HIGH COST OF CONSTRUCTION

The cost of construction has become one of the most significant factors influencing property prices.

Cement, steel reinforcement, roofing materials, electrical fittings, plumbing materials, tiles, doors, windows and other building components have become considerably more expensive. Labour costs have also increased, while developers face higher expenses for transportation, equipment, professional services and project financing.

Developers inevitably factor these increased costs into the prices of completed properties, which ultimately affects buyers and tenants.

However, it is important to distinguish between cost and value.

A property does not automatically become more valuable simply because its construction cost has increased. Value is influenced by market evidence, location, demand, utility, income-producing capacity, condition, title, accessibility, neighbourhood characteristics and development potential, among other factors.

This distinction makes the role of the Estate Surveyor and Valuer particularly important.

WHY PROFESSIONAL VALUATION MATTERS

Professional valuation should not be based simply on what an owner believes a property is worth or what a neighbour is asking for a similar property.

A competent Estate Surveyor and Valuer considers relevant market evidence and applies recognised valuation methodologies appropriate to the purpose of the valuation. This provides a more objective basis for decisions involving property acquisition, sale, mortgage financing, taxation, investment and asset management.

In Lagos, for instance, two properties situated only a few streets apart may have significantly different values because of differences in road accessibility, title, neighbourhood quality, flooding risks, commercial activity, parking facilities, infrastructure and development potential.

Location remains one of the most powerful determinants of real estate value.

THE HOUSING SUPPLY PROBLEM

Another major factor driving property prices is the shortage of affordable housing.

Nigeria’s growing population and rapid urbanisation have increased demand for housing, particularly in major cities. As more people migrate to urban centres in search of employment, education and business opportunities, demand for accommodation continues to rise.

Where housing supply fails to keep pace with demand, both rental and capital values are likely to come under upward pressure.

This is particularly evident in high-demand areas where available land is limited, and development costs are high.

IT IS NOT ONLY ABOUT LANDLORDS

The rising cost of accommodation is sometimes viewed simply as a consequence of landlords increasing rents. While individual landlords undoubtedly make their own pricing decisions, property owners are also operating within a challenging economic environment.

The cost of property maintenance, security, insurance, taxes, service charges, facility management, utilities and financing has increased significantly.

These expenses can ultimately influence the cost of occupying and managing property.

Therefore, addressing rising rents requires a broader understanding of the economic realities affecting the entire property sector.

THE GOVERNMENT’S ROLE

Government has an important role to play in making housing more accessible and supporting sustainable growth in the property sector.

This includes expanding infrastructure, improving transportation networks, supporting affordable housing initiatives, increasing access to mortgage finance, encouraging private-sector participation and creating a more predictable environment for property investment.

Infrastructure is particularly important because good roads, drainage, electricity, water supply, public transportation and other services can significantly influence the attractiveness and value of an area.

Better infrastructure can also open up new areas for development and reduce excessive pressure on already expensive prime locations.

THE PROBLEM OF PROPERTY MARKET DATA

There is also a pressing need for better property market data.

One of the major weaknesses of the Nigerian real estate market is the limited availability of reliable, transparent and regularly updated market information. Many property transactions are privately negotiated, making it difficult for buyers, sellers, investors and even professionals to establish accurate and consistent market benchmarks.

This information gap can contribute to unrealistic asking prices, poor investment decisions and disputes between parties.

Professional Estate Surveyors and Valuers can help bridge this gap through the systematic collection, analysis and interpretation of rental, sales and investment evidence.

Reliable market data will make the property sector more transparent and enable investors and policymakers to make better-informed decisions.

THE WAY FORWARD

Nigeria does not merely need more buildings. The country needs better planning, better infrastructure, better housing policies, better market information and better professional advice.

As property values continue to rise, it is important for Nigerians to understand that the price being demanded for a property is not necessarily the same as its actual market value.

Sound valuation provides an objective basis for determining what a property is reasonably worth under prevailing market conditions.

For investors, it can reduce the risk of making costly decisions. For property owners, it provides a professional basis for understanding the worth of their assets. For financial institutions, it supports prudent lending decisions. For government, it provides essential information for taxation, compensation, planning and infrastructure development.

Ultimately, the Nigerian real estate market needs to move beyond speculation and anecdotal pricing towards a more transparent, data-driven and professionally managed system.

As property values continue to climb, sound valuation is not a luxury. It is an essential instrument for rational property investment, responsible decision-making and the sustainable development of Nigeria’s real estate sector.

ESV. Idowu Temitope Grace – M04137