In the last 10 months, from mid-2017 to the last quarter of 2018, there has been a positive shift in the property market in Nigeria with marginal reduction in residential vacancy rates across the country’s major cities of Abuja, Lagos and Port Harcourt, close market watchers have said.
The market watchers, however, add that the reduction applies to properties in the low to mid-income markets where supply is not only low, but also sparse, while demand is high and growing in multiples.
The upper-middle to the high end markets are still struggling with over supply, low demand, high vacancy rate, falling rents, high rents payment default rate, and falling investment projections.
Northcourt Real Estate in its half-year 2017 market report notes that as at the last quarter of that year, vacancy rates in Lagos averaged 11 percent, down from 15.5 percent in H1 2017 and 32.87 percent at the end of 2016. In Abuja, it stood at a 7 percent average, down from mid-year’s 9.5 percent and 27.57 percent a year ago.
Analysts say that this reduction in vacancy rate can only explain the positive shift in the market, meaning that demand has moved from where it was 12 to 24 months ago and, by implication, underpins growing opportunities for investors, particularly for those playing at the mid-income market.
Tayo Odunsi, Northcourt CEO, points out in the report that, in a bid to maximize the value of their property, landowners looked more favourable to joint ventures with developers. He notes that Port Harcourt had the highest vacancy rates compared to Lagos and Abuja, averaging 12 percent. Like Lagos and Abuja, this rate climbed down from 13.75 percent at mid-2017 and 13 percent at the end of 2016.
This reduction in the vacancy rate, the analysts point out, is not only a function of growing demand for residences, but also a result of rising cases of conversion of residential properties in response to a growing demand for business promises and other commercial activities.
Ikeja GRA, a mid-income neighbourhood in Lagos, is a typical example of where the stock of residential houses has reduced due, in part, to conversions to office use while many others have either been sold or leased out. Isaac John Street, in that neighbourhood, stands out as one location where businesses have pushed out residents and taken over their homes on rent or lease.
Many other locations have been similarly affected. Following Lagos State government’s directive to transport companies to vacate the Jibowu area of the state for what it termed unwholesome activities, including obstructing traffic flow, these companies have swooped on the suburbs including Okota, Isolo, Ojota and Ejigbo axis to continue their business.
“Many of the residential properties along the stretch of road from the popular Cele Bus Terminal to Ejigbo have been bought over and converted to bus terminals by these companies including big names like God is Good Motors, Libra Motors and GUO Motors which, ordinarily, would not have come there”, said Enyinnaya Okezie, a resident whose house was converted to an office on Okota road.
According to him, this development has pushed many of the affected residents of these areas further down the suburbs such as Ikotun, Igando, Okokomaiko and Badagry, piling pressure on the existing inadequate infrastructure and pushing up house rents on otherwise uninhabitable houses.
“On daily basis, we get enquiries from prospective tenants who have been displaced by businesses that have taken over their residences. Empty houses are now hard to find and rents have gone up significantly. Right now, we demand N200, 000 to N250,000 per annum for 2-bedroom apartments and between N300,000 and N4500,000 per annum for a 3-bedroom apartment”, confirmed Yemi Madamidola, an estate manager in Ejigbo.
Before now, he continued, a 2-bedroom flat was going for between N150,000 and N180,000 per annum while 3-bedroom apartment was renting for between N250,000 and N350,000, depending on the age of the house and the facilities available. “More and more people are now moving into this side of town”, he said.
Many locations on the island have also been torched by this development. Lekki Phase 1 tops the list. Admiralty Way, a long stretch of road beginning from the first gate of that highbrow estate, could better be called ‘Commercial Avenue’ now with well over 90 percent of the houses used as offices or shops.
Though this is good for investors and landlords because of the opportunities it comes with, it has some drawback. This is worsening the country’s housing situation. Due to lack of dependable data and the opaque nature of the property market, it is difficult to say with certainty whether Nigeria’s housing stock has increased or decreased from the estimated 13 million units. But the rising cases of property conversion to office use indicate that residential housing stock is being depleted.
The conversion cuts across the major cities. Already, housing situation in these cities has been bad. Lagos alone has 3 million housing units deficit which authorities of the state say requires about N8 trillion to close. The on-going conversion is making the situation worse as residents have to pay more on house rents with increased travel time.