The inflation situation in Nigeria is no news. In one way or another, it has affected all industries in the country. Hence, as someone looking to delve into real estate, you may ask: “how will the inflation affect my investments?”
If so, you’re not wrong to wonder. Inflation gradually increases the prices of goods and services in a country’s economy. So, it’s no wonder why it also affects the real estate industry. But how?
How does inflation affect real estate in Nigeria? And can you manage it? In this article, you’ll discover the answer to these questions.
How Does Inflation Affect Real Estate in Nigeria?
- Property Values will Appreciate: Inflation spikes up the price of goods and services. And while at it, the values of real estate properties are expected to also increase. As a result, it becomes challenging for first-time buyers to step into the market since the prices may be unaffordable.
- Decrease in Investors: As property values increase, it makes it difficult for first-time buyers to invest in real estate. It will also discourage those looking to extend their already existing real estate investment portfolio.
- Increase in Rent Prices: As the cost of living increases, it’s not surprising to experience an increase in rentals. Landlords will want to make up for their increased spending thus making tenants spend more. To tenants, this is a disadvantage. On the other hand, landlords can generate more income.
An increase in rent prices remains the most observed effect of inflation in the real estate market.
Taking a look at these effects, one might conclude that those who invested in real estate before the current inflation must be making large profits by now. But that’s not necessarily the case. As one’s income increases (either through rentals or sale), one’s expenses also increases (due to the high cost of living).
Thus, to truly make a profit during inflation, you must plan carefully and make the right decisions. To help you do so, below are 3 tips for managing your real estate properties during inflation.
3 Tips for Managing Real Estate in Nigeria During an Inflation
1. Be Flexible:
The prices of goods and services in Nigeria are not static. What is cheap today becomes expensive tomorrow. As someone who wants to profit from real estate, you have to be ready to adapt to the unstable changes in the country’s economy.
2. Monitor Changes in Market Prices:
Being ready to adapt without taking action is pointless. Thus, you have to ensure you’re always up to date with prices in the real estate market. When you observe a change, respond accordingly by adjusting your prices.
When doing so, ensure your price changes are fair and reasonable to buyers and tenants. That’s why having good communication with them will help you.
- Be Ready to Take Calculated Risks:
What if you have no real estate property beforehand and are looking to buy? Should you wait till the inflation dies down before you make your move? Well, that’s an option. But here’s a fact – inflation in Nigeria is very unlikely to drop soon.
With that in mind, you need to be prepared to take risks and purchase a property so that you can also benefit from the inflation period. But note, take not just any risk but “calculated risks. The difference? Calculated risks is a detailed analysis of your potential profit and loss.
Once you’ve weighed the pros and cons, you can then choose to buy a property even during the inflation. When doing so, keep in mind several factors such as the property’s location, cost, and potential resale price.
Should You Invest in Real Estate in Nigeria During an Inflation?
Inflation offers many pros and cons to real estate investors. For first-time buyers, it discourages them from making a move. On the other hand, for those already in the market, inflation offers them an opportunity to increase their profits. However, not every investor can take advantage of that opportunity.
As someone new to real estate, you can increase your profit if you make the right decisions and are ready to adapt. Above all, by being willing to take calculated risks, you’ll surely be able to make a large profit from real estate during the current inflation.
