Ogundimu Iseoluwa is a 39-year old man working in an oil company and living in Lekki area of Lagos. He was among those caught in the web of worsening economic conditions occasioned by Covid-19 pandemic. Iseoluwa was laid off just two months ago from his job as an engineer in the oil firm.
To make matters worse, Iseoluwa’s N1.5 million rent which he has been paying annually for a three-bedroom apartment expires next month. His plan now is to relocate to an area that attracts between N500, 000 and N750,000 and downsize his accommodation to a 2-bedroom flat. He has also narrowed his search to places like Surulere, Yaba and Okota.
Iseoluwa is not an isolated case. There are many more like him who may have taken pay cuts or lost their jobs. In a bid to avoid any embarrassment from their landlords, these tenants have started looking for smaller homes. The reason that with income reduced, they have to cut down on expenses and the first thing they seem to want to cut down on is rent. Children’s school fees are next in consideration.
Estate surveyors and valuers plus other realtors say they are receiving phone calls of people looking for small size, budget-friendly family units to rent. Big size family units like 3 and 4-bedroom, terraces and duplexes are no longer in high demand which is a reflection of consumers shrinking wallets.
“That is the reality in the market at the moment. People are losing jobs or taking pay cuts. These people can no longer afford their current accommodation. But they must live somewhere even without jobs. So, they are looking for smaller units like one-bedroom or 2-bedroom flats. Today, over 60 percent of those looking for homes to rent or buy are for these small size units,” MKO Balogun, CEO, Global PFI, confirmed to BusinessDay.
Already, investment interest is growing to respond to this market reality. Investors are now refocusing and rethinking their products offering at both the high and low-end markets which have seen both intra and inter-area movement of renters. The opportunity, according to them, is compelling.
Africa Capital Alliance (ACA) and UAC Property Development Company (UPDC) are leading the pack in providing luxury small size family units.
ACA’s Blue Water Lagos is a contemporary mixed-use development comprising five 17 to 20 storey residential buildings. Phase 1 of the project called Sapphire Residences offers over 130 units that are predominantly 2-bedroom apartments. Obi Nwogugu, Principal at ACA, told BusinessDay that almost the entire units have been sold out.
In Surulere, Lagos, where estate agents and Landlords are making brisk business arising from the high demand for 2-bedroom apartments by renters, BusinessDay found out that investors have turned many parts of the area into huge construction sites, doing what is, arguably, gentrification at its best.
“Because of the flexible location that makes it easy for residents to go to either the mainland or the island with ease, this area is in hot chase and properties here have become hot cakes. We are finding it difficult to cope with demand,” Uche Ibezim, a professional estate agent said.
In Aguda, Ijeasha and Itire areas of this market node, BusinessDay found out that many old houses were being pulled down and new ones being developed. Also, some old houses were being remodelled to respond to the new demand from home seekers.
According to Ibezim, due to high demand, landlords were marking up their rents almost on daily basis, explaining that that is the reason people are changing address. “You see people from the Island moving to Surulere, Ilupeju, Gbagada and Yaba, while low-income earners in these locations have been forced by rent increases to move to the suburbs like Egbeda, Ikotun, Okota and Ijegun,” he said.
He noted that in these suburbs, despite the poor state of infrastructure, landlords are also increasing rents, citing Ikotun and Ijegun where house rent for 2-bedroom apartment has gone up from N180,000 per annum in 2019 to between N250,000 and N400,000, depending on the age of the property.
Though this trend is not so pronounced in the highbrow locations of the island, experts say it seems imminent with economic condition getting worse despite Nigeria exiting recession. “A tenant paying 15 million rent per annum will perhaps step down to a 10 million rent property,” explained Gbenga Olaniyan, Principal Partner at Gbenga Olaniyan and Associates and CEO, Estate Links Limited.
“This cascades down as someone paying 2 million suddenly realises he can’t afford it and wants to rent a flat of N1 million,” he added, disclosing that his firm has not witnessed any inter-area movements but more of intra-area searches where renters seek cheaper accommodation in the same location.
“Demand for low rentals in the property sector has largely witnessed some appreciable level of increase since we started experiencing a downturn in the economy, thus making the hinterlands to be the ultimate beneficiaries and the final destination for those relocating from the posh areas,” he stressed.
Housing remains a teething problem in Nigeria and for a country whose housing demand-supply gap is estimated at 20 million units, this is a dire situation. Experts have recommended that the government should declare an emergency in the sector to enable it to attract appropriate attention.
According to the experts, the government at all tiers should remove all the bottlenecks associated with access to land. The process of transferring title is presently fraught with irregularities due to some deliberate administrative bureaucracy and fraudulent practices of government officials.
The price of building materials has remained relatively out of control. This has made it practically impossible to deliver on affordable housing and also render all attempts by the government to regulate the sector unsuccessful.
Chudi Ubosi, Principal Partner at Ubosi Eleh + Co, wants the government to solve the problem by reviewing the Land Use Act and ensuring better access to land as well as create an enabling economic environment for businesses to thrive.
