Sharp reduction in demand for highbrow properties

The housing market has in recent times taken a plunge, leading to a significant rise in vacancy rates in expensive locations, notably Ikoyi, Victoria Island and Lekki in Lagos, and Asokoro, Wuse and Garki areas of Abuja Federal Capital Territory, industry close watchers say.

The vacancy rate which rose to 28 percent in June, from 19 percent in May, does not, however, translate to an opportunity for prospective tenants and home buyers to jump to the market and grab homes.

Bismarck Rewane, chief executive officer, Financial Derivatives Company Limited (FDC), explained that the vacancy factor was a function of

market reaction to high rent in these expensive areas, citing Ikoyi, Victoria Island and Lekki where, he said, both residential and commercial properties were affected.

“Residential vacancy factor is increasing in Victoria Island and Ikoyi due to high rent. In Victoria Island, it increased to 28 percent in June, up from 19 percent in May this year, while Ikoyi has seen an increase from 4 percent in May to 6 percent in June this year,” he said in the FDC quarterly economic survey, adding that Lekki was the worst hit with 31 percent rise in June from 23 percent in May.

Rewane observed that in Victoria Island, the vacancy rate was higher in residential than in commercial property, which is, however, to be expected, given Victoria Island’s status as the most vibrant commercial and business hub in Lagos. He pointed out that there was high demand for office space in VI, explaining that there was higher vacancy factor in residential flats than houses because the area had seen increased construction of quite a number of blocks of flats.

Chudi Ubosi, principal partner, Ubosi Eleh + Co, told BusinessDay that in spite of relatively poor infrastructure in some of these expensive locations, house prices and rents were way beyond the reach of many who would like to live in such locations.

Ubosi cited Banana Island in Ikoyi, where a well-finished four-bedroom apartment sold for as much as £1 million, while a five-bedroom duplex in good location sold for between N450 million and N500 million.

Ignatius Ikechukwu, an estate consultant in Abuja, told BusinessDay in a telephone interview that there were more empty houses than those occupied in Abuja highbrow areas. He cited Wuse area where, he said, a two-bedroom apartment rented for between N500,000 and N1 million, while a three-bedroom apartment in the same location went for between N1 million and N1.5 million per annum.

The FDC survey singled out Sinari Daranijo Street in VI as the area with the highest vacancy factor, pointing out that the 31 houses and 16 flats on the street had 13 percent and 81 percent vacancy rates, respectively, with as much as 30 percent commercial vacancy factor.

This is against what obtains in Elsie Femi Pearce Street in the same location, which has 20 houses and eight flats with 0 percent and 40 percent vacancy rates, respectively, and 0 percent commercial factor.

Rewane pointed out that in Ikoyi, vacancy rate was higher in commercial than residential property because Ikoyi was still predominantly residential, noting that vacancy rate was highest in Cooper Road, which has 39 houses and 57 flats with 3 percent and 40 percent vacancy rate, respectively.

According to Rewane, the house price boom in Q1 2014 saw approximately 20 percent increase in prices, which raised prospects for recovery from the economic recession, citing the UK market, where house prices went up 7.35 percent year-on-year within the same period.

He said there was a 7.5 percent increase in the prices of residential properties in Ireland and 31.57 percent in Dubai, adding that real estate activities in Lagos were still improving with foreign investors continuing to flood the city, despite insecurity issues in the northern part of the country.

BusinessDay