Nigeria’s Real Estate Sector Grapples with Inflation and Affordability Crisis in 2025
Nigeria’s real estate sector faced significant headwinds in 2025, with escalating inflation and a worsening housing affordability crisis undermining investment, construction activity, and overall demand. Stakeholders across the industry have highlighted a challenging economic climate that has made homeownership and even rental accommodation increasingly difficult for the average Nigerian.
Michael Egbekoya, Chief Executive Officer of McYouniverse Group, provided a stark overview of the situation. He estimated that national housing prices saw a year-on-year increase of approximately 15% to 25%. While this rise was not characterized by a widespread market crash, it significantly intensified affordability pressures. Egbekoya emphasized that the price hikes were not primarily driven by demand but were largely a consequence of cost-push inflation.
- Price Increases Across Segments:
- Prime Locations: Luxury residential properties in exclusive areas like Ikoyi, Victoria Island, Maitama, and Banana Island experienced even higher increases.
- Short-Let and Serviced Apartments: These segments, particularly in Lagos and Abuja, saw significant price appreciation.
- Commercial Real Estate: Properties in prime business districts also recorded substantial growth.
- Emerging Areas: Peri-urban and developing regions saw more moderate price growth compared to established prime locations.
Egbekoya noted that in prime business districts and luxury segments, prices rose by an estimated 25% to 40%. This surge was attributed to high demand from expatriates and diaspora buyers, coupled with the profitability of the short-let market. Conversely, he observed that prices in low-income residential estates did not experience the same dramatic escalation.
The issue of affordable housing remained critically inadequate. Developments marketed as “affordable” were often only within reach of upper-middle-income earners. Entry-level home prices in many cities continued to exceed five to seven times the average annual income, a figure significantly higher than global affordability benchmarks. While government-led affordable housing initiatives existed, they failed to meet the sheer scale of demand, leaving affordable housing more as a concept than a tangible reality for a substantial portion of the population.
Rental Market Under Pressure
The rental market also experienced sharp increases in 2025, with rental prices often rising faster than property sale prices. Egbekoya estimated rental growth to be between 20% and 35% in major cities, and as high as 30% to 45% in high-demand urban neighborhoods. Several factors contributed to this trend:
- High Homeownership Barriers: As purchasing a home became increasingly unattainable, more individuals were pushed into the rental market.
- Urban Migration: Continued influx of people into cities placed greater demand on existing rental stock.
- Construction Costs Passed On: Developers passed on increased construction expenses to tenants.
- Short-Let Conversions: A growing number of properties were converted from long-term rentals to short-term lets, reducing the available supply for permanent residents.
Escalating Construction Costs
A significant contributor to the overall price increases was the surge in construction material costs. Egbekoya detailed the estimated increases:
- Cement: 20% to 30%
- Steel and Reinforcement Bars: 25% to 40%
- Finishing Materials (Tiles, Fittings): 30% increase, particularly for imported items.
- Labour Costs: 15% to 20%
These hikes were driven by a confluence of factors including exchange rate depreciation, elevated energy and transportation costs, import dependency, and inefficiencies within supply chains. These issues not only inflated prices but also led to project delays and squeezed developer profit margins.
Egbekoya concluded that Nigeria’s housing prices in 2025 did not collapse, nor were they fueled by speculative excess. Instead, the price increases were largely inflation-driven, reflecting the escalating costs of construction, currency pressures, and persistent structural supply shortages. This dynamic continued to erode real affordability for the majority of Nigerians.
Demand Outstrips Supply
Estate surveyor Olorunyomi Alatise echoed these sentiments, pointing to a severe and ongoing imbalance between housing demand and supply in 2025, with affordability emerging as the sector’s central challenge. He highlighted rapid population growth, increasing urbanization, and a strong youthful demographic as key drivers of escalating housing demand, especially in major cities like Lagos, Abuja, Port Harcourt, and Kano. With over half of Nigeria’s population now residing in urban areas, the limited housing supply faced immense pressure.
Alatise also noted legislative efforts, such as the Lagos Tenancy Law, aimed at improving the transparency and sanity of real estate transactions in Lagos. He suggested that robust enforcement of such laws, replicated by other government bodies, could lead to a more orderly real estate market.
Persistent Housing Deficit
Babatunji Adegoke, treasurer of the Nigerian Society of Engineers, Victoria Island Branch, emphasized the sector’s ongoing struggle with a well-documented housing deficit. Demand consistently outpaced supply, propelled by rapid urbanization, population growth, rising construction costs, and limited access to affordable financing. While private sector initiatives were present, they were insufficient to significantly bridge the gap, particularly in the affordable and social housing segments.
Outlook for 2026 and Beyond
Looking ahead to 2026, Adegoke predicted several trends:
- Compact Housing: Housing units are expected to become more compact as larger living spaces become a luxury for a select few.
- Peri-Urban Development: Increased development is anticipated in emerging and peri-urban locations as infrastructure improvements enhance accessibility to previously underserved areas, and affordability pressures push households away from major city centers.
Adegoke expressed skepticism regarding any significant decline in housing prices. The sustained rise in construction materials, energy, and financing costs would continue to exert upward pressure on development expenses. Furthermore, new tax policies were expected to increase construction costs further. Adegoke stressed that without deliberate policy interventions focused on infrastructure provision, the exploration of alternative building materials, and improved housing finance mechanisms, affordability would remain a critical challenge in 2026.
In 2025, the cumulative effect of rising construction costs—encompassing cement, steel, energy, and new taxes—pushed housing further out of reach for most Nigerians. With household incomes failing to keep pace, low- and middle-income families found it increasingly difficult to secure decent accommodation, underscoring the urgent need for policy and financing interventions to improve housing accessibility.
