Residential vacancy rate drops across cities following improved economy- Report
The number of empty spaces in residential buildings across major cities in Nigeria has dropped following the slight improvement in the nation’s economy, a new report on real estate has revealed. The Centre for Affordable Housing estimates that $360 billion is required to solve the national housing deficit which is 10 times the market capitalisation of the Nigerian Stock Exchange, adding that the housing deficit for Lagos State alone is put in excess of three million units and will require approximately N8 trillion to resolve at $10,000 per unit.
According to the report, to attend to this, there are ongoing initiatives by the Federal Government to increase housing supply by initiating mass housing projects across 33 states of the country. The project would engage over 650 contractors to deliver 2,736 units, employing 54,680 people in the process. It noted that working with the results of opinion polls and interviews, the project’s strategy is to construct bungalows with courtyards in the northern part of the country and blocks of flats or condominiums in the South, stressing that the experts, however, seem unconvinced, citing the slow pace of work, as designs for different regions in the country remain the only visible signs of progress. In addition, it said various states have created different initiatives to curb the housing gap in their respective constituents with Lagos State partnering with the Nigerian Mortgage Refinancing Company, NMRC, and private developers to deliver 20,000 housing units by the end of 2018. The report further revealed that Kaduna State Government has similarly embarked on an affordable housing programme and passed a law to establish the state’s Mortgage and Foreclosure Authority to facilitate speedy foreclosures on defaulters to its home-ownership scheme in partnership with the mortgage institutions. “As it stands, vacancy rates in Lagos averaged 11 per cent down from 15.57 per cent in half 2017 and 32.87 per cent at the end of 2016. Developments that had slowed in much of Lagos began receiving some attention as developers gradually moved back to residential sites as the economy turned for the better. “The stock of residential units in the Ikeja GRA area reduced in part due to conversions to office use while many others were either sold or leased out. The improved economic situation also encouraged the completion of many housing projects. Even the high-end 15-storey Afren Tower in Eko Atlantic received its first tenant in August 2017. “Vacancy rates in Abuja stood at a 7 per cent average, down from mid year’s 9.5 per cent and 27.57 per cent a year ago. In a bid to maximise the value of their property, landowners looked more favourable to joint ventures with developers,” the report stated.
It said the oil sector, long a favourite of luxury leasing, remained below its former earning capacity and was unable to sign many leases, and so was the case for their supply chain such as consultants, allied services and others, maintaining that other sectors that had long contributed to the demand for high-end developments were also down. It pointed out that property owners continued to be flexible with their terms in order to hold onto existing tenants with rents being reduced by up to 25 per cent in some instances, arguing that this state of affairs is similar to what was observed in the Ikeja GRA, as lease flexibility was seen not only in amounts paid and lease terms, but also in length of stay. According to the report, the fast growing business community in the Lekki Phase 1 and Oniru axis saw a demand from middle-income earners seeking to live close to work place, pointing out that standard three-bedroom homes, which are more readily available in these areas, tend to lease with a range of N2.5 million to N4 million per annum. “But the growing demand is for one or two-bed condos. This is the trend with other residential communities at borders of CBDs or commercial hubs, across the country. Service charge pricing and collection is increasingly a contentious issue in many of the gated estates and multi-tenanted developments. Landlords could manage with nil increments in rents but found it difficult running their facilities due to defaults in service charge payments. “Port Harcourt had the highest vacancy rates compared to Lagos and Abuja, averaging at 12 per cent.
Like Lagos and Abuja, this is also down from 13.75 per cent at the mid point of 2017 and 13 per cent at the end of 2016. The market has been described as not vibrant and landlords have dropped rents marginally to maintain existing tenants. “To Let boards are fast becoming a major feature in the city especially in mid to high-income localities. Purchasing power has dropped and tenants are choosing to maintain their current locations by negotiating favourable rents. There is a clear lull in the demand for luxury apartments of all sizes. “The effect of the gradual improvement in the economy is yet to influence spending in the city. To help curb the financing challenges of housing, the Mortgage Warehouse Funding Limited MWFL, was launched in Q3 2017 to provide short-term pre–financing in local currency to mortgage banks to strengthen their mortgage origination capacity. “The body essentially sits between the PMBs and the NMRC. To provide short- term financing, the MWFL intends issuing investment grade Commercial Paper under an initial N20 billion scheme. Some major activities in the residential space in the period under review include the listing of Mixta Nigeria’s N4.5bn guaranteed bond for affordable housing on the NSE. Odu’a Investment Company inaugurated a 4,400sqm for those in need of smaller sized offices. “To better avoid paying out-of-reach rents, businesses have continued the trend of moving to residential property and converting them to offices. Such property offer the advantages of exclusivity and lower management costs.”
By Kingsley Adegboye