Following the improvement in the economy over the last eight months, the real estate market in Nigeria is starting to look up with pockets of opportunities emerging in the residential segment of the market.
The low to middle income market remained strong all through the recession period while the upper market struggled. But developers are adopting creative ways of dealing with the persisting challenge with a view to stimulating demand and sustaining their business.
Experts, who gathered for a one-day summit jointly organised in Lagos by Fine and Country West Africa, BusinessDay Media Limited and the Lagos Business School, surmised that outlook for this market in 2018 was bright and promising, hinging their prediction on improved economic climate.
“We see a more vibrant residential market coming as a result of an improved economy”, said David Mba, a sales consultant at Fine and Country, noting, “what were considered challenges in the past are now opportunities”.
Some of the vacant apartments in Ikoyi and Victoria Island precincts, he said, were being converted to short-let apartments, providing flexible accommodation for people in dire need of this service.
Similarly, some of the vacant semi and fully detached houses in Lekki Phase 1 are also being converted to 1-bed apartments and studios, and these, Mba noted further, were providing the much needed accommodation for young working-class singles who needed to live close to work.
Developers , in their bid to share risk and also raise more capital, are going into joint ventures. Only recently, Brains and Hammers Limited, one of Nigeria’s leading real estate and infrastructure development companies, entered into a joint venture agreement with Lagos State government.
This move, believed to be the company’s response to pressing demands from its clients who also want to acquire property in Lagos, will see it developing 750 housing units, comprising 132-tower units and 618 units that will be part of the Jubilee Estate development in Iganmu of Lagos.
The Phase 1 of the project comprises 129 units made up of 12 units of 2-bedrooms, 24 units of 4-bedrooms terrace and 93 other units. There are also twin towers made up of 132 units, comprising 60 units of 1A-bedroom, 24 units of 2 1B bedroom, and 24 units of 3-bedroom maisonette.
Mba pointed out that it was still a buyer’s market, explaining that purchasers continued to have access to very flexible payment plan of up to 36 months. They would be paying by installment for a completed project. There are also rent-to-own initiatives while developers now accept quarterly rental payments.
Other market trends, he said, included increase in demand for good value 3 or 4 bedroom apartments in Ikoyi precincts, selling within the range of N120 million to N150 million; increase in demand for houses including terraces, semi and fully detached units.
“There are three major considerations for a good value property which include right location, right place and right price. Space, in this context, also refers to quality of build and features”, he said, adding, “we have also seen increase in demand for 1 and 2 bedroom apartments in Lekki precincts”.
Frank Aigbogun, publisher/CEO, BusinessDay, offered insights into the economy, noting that the macro-economic environment had improved significantly, raising hope for the real estate sector and investors who had positive mindset and were ready to take tap into the emerging opportunities.
Aigbogun was of the view that improvement in the economy meant there would be increased business activities that would, in turn, trigger more demand for real estate products like commercial office, retail and residential buildings.
But Udo Okonjo, Fine & Country’s CEO/Vice Chair, pointed out that the sector’s positive outlook would come with opportunities for only investors who were ready to understand that the market had changed, explaining that the theme of the summit, ‘Navigating Change’ was carefully chosen to reflect the new market situation.
According to her, from their market survey, there would be opportunities across the various segments of the market including residential, commercial office and retail, say ing, “lifestyle communities are the new face of residential real estate”, she said, adding that such communities had the advantages of economies of scale and security.
Another major area where opportunity existed for investors, she revealed, was millennial and student housing which many investors had started tapping their benefits . Timothy Nubi, Dean, Faculty of Environmental Sciences, University of Lagos, confirmed that many investors had already taken position around the university campus and were delivering one-bedroom self-contained apartments for N500,000 per annum.
Experts insist there will be some respite for this segment of the market which had struggled over the years with high vacancy rates, although this was not peculiar to this segment as both the commercial office and retail markets suffered the same fate and are still having high vacancy rates.
As at the last quarter of 2017, vacancy rates in Lagos in residential buildings had dropped. They averaged 11 percent, down from 15.5 percent in H1 2017 and 32.87 percent at the end of 2016. In Abuja, it stands at a 7 percent average, down from mid-year’s 9.5 percent and 27.57 percent a year ago.
A recent Northcourt Real Estate report 2018 outlook notes that, in a bid to maximize the value of their property, landowners look more favourable to joint ventures with developers, pointing out that Port Harcourt had the highest vacancy rates compared to Lagos and Abuja, averaging at 12 percent. However, Like Lagos and Abuja, this rate is also down from 13.75 percent at mid-2017 and 13 percent at the end of 2016.
Tayo Odunsi,the company’s CEO, revealed that within this same period, the fast growing business community in the Lekki Phase 1 and Oniru axis saw increased demand which came from middle-income earners seeking to live close to their workplace. “Standard 3-bedroom homes, which are more readily available in these areas leased for N2.5 million to N4 million per annum, but the growing demand is for one or two-bed condos”, he said.