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That’s not to say you can’t spot significant trends early enough for you to take advantage of them. All you really need to do is have your eyes on the right indices. This article lays out six things you should be watching as a real estate investor in 2023. The insights they’ll yield may be crucial to your success in the New Year.
Industry GrowthFirst, you should keep tabs on how the industry performs overall throughout 2023. The good news is that analysts expect it to grow by quite a bit. According to the Financial Derivative Company (FDC), Nigeria’s real estate industry will expand by 5.2% over the coming eleven-plus months. However, this growth will certainly not be even; some locations and types of property will perform better than others. So it’s important that you watch for where the building, selling and renting activity is happening the most.
The Short-Let NicheIn the past few years, we’ve seen a rapid increase in the number of properties in the short-let niche. Cities like Lagos and Abuja have been at the centre of this boom, having caught on to what’s been a global trend. We can expect this segment to carry on its upward trajectory, as non-locals seek for a more homely alternative to what hotels provide. If you haven’t staked anything on this portion of the market, now’s probably the time to consider doing so.
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Building CostsNigeria is in the midst of its most severe price inflation in more than a decade. And it has affected building costs. Developers are finding that they need a lot more capital than usual to get their construction projects done. Landlords, looking to pass on these costs, have increased their rental charges by much. Whatever your plans are as an investor in this space, you should factor aggressive price hikes across the economy into your financial models and charges.
Development of Gated CommunitiesThis is by no means a new thing. There are already numerous enclosed estates in all of the country’s first-tier cities. But what’s news is that we should expect more of them to emerge as the year progresses. The fact that the middle class (for which these communities are designed) seems to be struggling at the moment isn’t deterring developers from constructing more gated estates or putting land in these areas up for sale. Just be sure to do your due diligence before deciding whether or not to invest in such locations.
Demand for Affordable HousingThere are far more people looking for housing than there are houses available for them to buy or rent. Recent data put Nigeria’s housing deficit at between 20 and 22 million units. People want a home that they can afford. Unfortunately, a lot of what’s available is out of their financial reach. Investors who are able to solve this problem for the average Nigerian will reap good returns as a result.
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Mortgage Interest RatesMortgage interest rates in this corner of the world have historically been higher than what many prospective builders can live with. And with authorities in charge of Nigeria’s monetary policy moving to raise rates even further, there’s a chance that mortgages could become more expensive for a while. But if the numbers remain as they are, players in real estate may stick with their favourite mortgage providers.
Final WordsThis year could be an interesting one for real estate in Nigeria. It may see a continued recovery of the industry from the impact of the COVID-19 pandemic, or its performance may fall just short of analysts’ expectations. Whatever happens, be sure to keep an eye on the trends we’ve just discussed. They may be crucial to your success as an investor in the space. Featured Image Source: Pixabay
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