Nigeria’s Real Estate Sector Records Biggest Growth In 6 Years

Nigeria’s real estate sector posted 3.85 percent growth in the second quarter of 2021, representing its highest growth in six years.

The sector's growth was largely due to the full re-opening of the economy and increased investment interest, and is its highest second-quarter growth since the 4.95 percent growth in the second quarter of 2014, according to data from the Nigerian Bureau of Statistics (NBS).

However, a breakdown of the NBS data reveals that the sector’s contribution in the review period was slightly lower by 0.6 percentage points as it contributed 5.28 percent against 5.34 percent in the same period of 2020.

Compared with the corresponding quarter of 2020, when the sector contracted by 21.99 percent, the 3.85 percent Q2’2021 growth is higher by 25.84 percentage points. It is also 2.08 percentage points higher relative to Q1’2021.

Despite the slowdown in the economy, which reduced household income and crimped consumer purchasing power, the real estate sector has seen increased investment interest with individual and institutional investors raising capital and deploying the same into the sector.

The increase in economic activities in the property market could be confirmed by the performance of the construction sector in the second quarter of 2021. Nigeria’s construction sector grew by 3.70 percent year-on-year, higher by 35.46 percentage points from the -31.77 percent recorded in the comparable quarter of 2020.

Further analysis of the NBS data shows that the 3.85 percent growth reported in Q2’ 2021 is the fourth positive GDP value the sector has recorded in the last five years. The first positive value was reported in Q1’ 2019, the second was in the fourth quarter of 2020 when the sector exited an almost two-year recession, and the third was the first quarter of 2021.

As yields on the less risky government Treasury Bills (T-Bills) crashed to near-zero percent in 2020, investors’ appetite for the more tangible real estate market increased, according to analysts.

Although the interest rate environment has increased in 2021 compared with the previous year (at 7% in August after hitting almost 10% in May), the country’s double-digit inflation rate that put the real return on investment in negative makes real estate with higher return a top choice for investors.