Residential rents in Lagos continued to climb in the second half of 2025 despite a moderation in Nigeria’s headline inflation, according to a new property market report released by Knight Frank.
The report, presented during the H2 2025 Lagos Market Update, highlights a persistent increase in rental prices across several parts of the state, driven largely by strong demand and a limited supply of formal residential housing.
Analysts say the situation reflects structural challenges in Lagos’ housing market, where demand for accommodation continues to outpace available supply.
Strong demand keeps rental prices high
According to the report, residential rents recorded noticeable increases in several locations when compared with the second half of 2024.
Knight Frank noted that the continued growth in rental prices reflects resilient demand within the Lagos housing market.
Even as inflation slowed during the period under review, the shortage of formal housing units remained a major factor sustaining upward pressure on rents.
The report explained that Lagos’ housing market is characterised by structurally constrained supply, meaning the number of available residential properties remains insufficient to meet growing urban demand.
As a result, affordability pressures have continued to rise for many residents seeking accommodation in the city.
Housing supply remains limited
The property consultancy firm pointed out that the limited availability of formal residential stock is a key factor shaping pricing dynamics in Lagos.
With the population of the state continuing to grow rapidly, the demand for housing has expanded significantly, while supply growth has remained relatively slow.
Experts say this imbalance between demand and supply has made Lagos one of the most expensive rental markets in Nigeria.
Government housing interventions
In response to the growing housing deficit, both federal and state authorities have introduced various initiatives aimed at increasing housing supply and improving access to home financing.
Knight Frank noted that public-private partnerships between developers and the Lagos State Government helped deliver approximately 653 residential units during the review period.
The report added that additional housing projects are currently within the development pipeline and are expected to increase the availability of residential units in the coming years.
Housing finance reforms and government programmes are also expected to play a role in improving access to homes.
Mortgage initiatives introduced
On the financing front, the Federal Government recently launched the Ministry of Finance Incorporated Real Estate Investment Fund, designed to provide long-term housing loans to Nigerians.
The programme offers mortgage financing at an interest rate of about 9.75 percent, making it one of the more affordable mortgage options currently available in the market.
In addition, the Federal Government’s Renewed Hope Housing Programme is also underway, with around 2,000 housing units nearing completion in Ibeju-Lekki.
These initiatives are part of broader efforts to reduce the country’s housing shortage and improve access to affordable homes.
Shift in rental demand patterns
Looking ahead to 2026, Knight Frank predicts that demand will increasingly focus on functional living spaces.
Studio apartments and one-bedroom units in mid-market areas such as Yaba and Surulere are expected to experience the fastest absorption rates due to their relatively lower rental costs.
These locations remain attractive to young professionals and middle-income earners seeking more affordable accommodation options within the city.
Infrastructure development to influence supply
The report also suggested that future housing supply may follow major infrastructure developments.
Projects such as the Lagos-Calabar Coastal Highway and development along the Epe corridor are expected to transform previously peripheral areas into attractive residential zones.
Improved connectivity from new infrastructure could increase the value of land and encourage more housing development in those areas.
More transparency expected in rental market
While rental growth is expected to continue, the report indicated that the Lagos property market may become more transparent in the coming years.
The introduction of the Nigerian Tax Act 2025 is expected to encourage landlords and tenants to formalise rental agreements in order to benefit from tax relief provisions.
This development could help improve documentation and transparency in the rental market.
Knight Frank concluded that although inflationary pressures may fluctuate, the fundamental supply gap in Lagos housing will continue to shape rental trends unless large-scale housing development significantly increases the number of available homes.
