THE PROPERTY MARKET IS WITNESSING UPSURGE IN VACANCIES OF RENTAL ACCOMMODATIONS, EVEN AT THE LOWER END. THIS UNUSUAL PHENOMENON BECAME NOTICEABLE FROM THE FIRST QUARTER OF THIS YEAR. AS AT THE LAST COUNT, MORE PROPERTY HAVE BEEN RECORDED AS BEING IN THE RENTAL MARKET FOR UP TO THREE MONTHS. THESE VACANCIES REMAIN REGARDLESS OF A REDUCTION OF RENTS CHARGED, WRITES BENNETT OGHIFO
Property in high-end rental markets in some cities, particularly Lagos and Abuja, remain vacant for months and sometimes, years. The trend has left people guessing that either the rents charged on these properties are too high or that the owners are in search of tenants they consider desirable. Regardless, genuine operators in the build-to-let market are anxious because they may not receive rental returns as earlier projected.
Another dilemma here is that these landlords are not sure they should lower the rents slightly. They are not used to what is unfolding. The norm was for prospective tenants to visit their construction sites frequently and, even offer to pay rents on apartments before they were completed.
But, some landlords are still taking it in their stride, because it is their hope that it is just an ugly market phase that will dry up and go away within a short time. Other landlords with vacant buildings are said to be choosy. “They don’t need the money that urgently and so can afford to wait until they find the type of tenant that suits them. It is possible they are being cautious because of previous experiences,” said Tunde Babatunde, a real estate practitioner.
Wrong Timing…
Some property sector managers contend that the beginning of the glut in the rental market could be traced to the federal government’s resolved to monitise the housing package of workers in the public service. They allege that some top civil servants, who built them in anticipation of letting to the government as official quarters for other public servants, own most of the vacant buildings in Abuja and Lagos.
Some property sector managers contend that the beginning of the glut in the rental market could be traced to the federal government’s resolved to monitise the housing package of workers in the public service. They allege that some top civil servants, who built them in anticipation of letting to the government as official quarters for other public servants, own most of the vacant buildings in Abuja and Lagos.
“Those vacant houses you see all over the place were put there by those, who were negotiating with the government to let their homes for civil servants’ quarters,” Babatunde said. Adding, “You cannot rule out the fact that some of them were built from proceeds of fraudulent deals. It is one of the reasons the Nigerian Institution of Estate Surveyors and Valuers (NIESV) is collaborating with the Economic and Financial Crime Commission (EFCC).”
Abuja Market…
There is high power play in Abuja’s property market because it is flush with hard cash. Abuja is where there is a lot of highly priced property, most of which are badly finished, in choice locations. These homes attract princely rents and only a few brave people with prospects venture into these areas. According to an estate surveyor and valuer, Mr. Emmanuel Nwainokpo, “rental values in Abuja are driven by a high volume of unearned income occasioned by an astronomical markup on subsequent transactions on bare land. And kick-backs from contracts and gratifications from contractors to high-profile public officers in anticipation of future patronage.”
There is high power play in Abuja’s property market because it is flush with hard cash. Abuja is where there is a lot of highly priced property, most of which are badly finished, in choice locations. These homes attract princely rents and only a few brave people with prospects venture into these areas. According to an estate surveyor and valuer, Mr. Emmanuel Nwainokpo, “rental values in Abuja are driven by a high volume of unearned income occasioned by an astronomical markup on subsequent transactions on bare land. And kick-backs from contracts and gratifications from contractors to high-profile public officers in anticipation of future patronage.”
Nwainokpo classified Abuja’s low density property market as; Maitama, Asokoro, Wuse 2, and Garki 2; medium is Gwarinpa, Jabi, Life Camp, Wuse (Zone 1-8), Garki (Area 1- 11), among others and the high density markets are in Kubwa, Nyanya, Mpape and other designated satellite towns. He said the occupancy ratio in the low-density area is 65 per cent; medium, 85 per cent and high is 95 per cent.
There is also a stable mobility of funds. He said that: “private operators often lay hands on good money. That Abuja rents are high is no news. It is a function of the aforementioned mobility of funds.” He said for the same reason, professional housing developers would rather build their homes outside the city centre and drive back in the morning than pay annual rents in excess of N5 million per annum for a three or four bedroom apartment in the low density area.
The occupancy ratio, he said related to houses that have remained empty for up to two years, adding that in the medium density areas, residential property often rise up to two or three floors and that “rent on a three bedroom apartment in a block of flats would go for N1.2 million to N1.6 million. Apparently this can be accommodated by the middle class.”
He said vacancy ratio of 15 per cent referred to tenantable flats that were empty for up to three months. He explained that: “in the satellite towns, bungalow-type houses appear to be the order perhaps in an attempt to weigh the cost of going high against the class of tenants envisaged.” He said the vacancy rates are high because, for instance, rent on two bedroom flats comes up to N700,000. “Vacancy ratio refers to flats that remain empty for up to three months. The trend is for people to buy a plot somewhere and build a home for themselves.”
This situation, Nwainokpo said was bound to impact on rental values in future, “though there are no cases of a drop in rent as at now. Besides, there are many uncompleted estates -sometimes comprised of 40-100- dotting the Abuja landscape. When they are completed and let or sold rental values will also be affected.”
Lagos Market…
Once upon a long time, prospective tenants queue, with hard cash in hand, and jostle for homes being constructed. Some get duped in the process while others get far less than they bargained for in terms of aesthetics but then, they got a place anyway. In response to the high demand, these landlords charge outrageously high rents that must be paid in advance of two or three years.
Most people paid the first rents but, as time passed, it became obvious to landlords that they were beginning to dissipate energy in an attempt to get renewal of rents from sitting tenants. The reason is that the economy has not been fair on everybody and people are becoming cash-strapped. Those landlords, who made slight increases in rents, ended up in courts.
Lagos Market…
Once upon a long time, prospective tenants queue, with hard cash in hand, and jostle for homes being constructed. Some get duped in the process while others get far less than they bargained for in terms of aesthetics but then, they got a place anyway. In response to the high demand, these landlords charge outrageously high rents that must be paid in advance of two or three years.
Most people paid the first rents but, as time passed, it became obvious to landlords that they were beginning to dissipate energy in an attempt to get renewal of rents from sitting tenants. The reason is that the economy has not been fair on everybody and people are becoming cash-strapped. Those landlords, who made slight increases in rents, ended up in courts.
Now, the trend is to build even a stock home in the suburbs that they could improve upon instead of paying all that money to somebody, who will ask for more when the rental period expired. “People now move into smaller accommodations, while they build theirs in the suburbs,” said a real estate professional, whose property has been vacant since the first quarter of the year.
“The building is spacious with big grounds and we are asking for a year’s rent but up till now no tenant has taken it,” said the realtor, who does not want to be named.
Port Harcourt Market…
The property market in Port Harcourt is very vibrant. That is one city where people work hard and play hard and they build and buy homes faster than anywhere else in the country, according to realtors in the city.
Port Harcourt Market…
The property market in Port Harcourt is very vibrant. That is one city where people work hard and play hard and they build and buy homes faster than anywhere else in the country, according to realtors in the city.
“There is vacancy in every segment of the market. Properties become vacant and people rent them. We have properties that are in the market for a long time, particularly when they are distressed,” said a real estate sector player, Opus Wonodi. Other properties remain vacant if the rents are too high or if they are in areas where there are bad roads.
Regardless, he said the lower and medium density markets in the oil city are thriving and these are in the old GRA, new GRA and the industrial layouts, among others.
Regardless, he said the lower and medium density markets in the oil city are thriving and these are in the old GRA, new GRA and the industrial layouts, among others.
Market Signs…
As things stand, the nation’s property market is responding to more houses built in the informal market. These are houses that were being built gradually over the years by individuals and corporate developers.
As things stand, the nation’s property market is responding to more houses built in the informal market. These are houses that were being built gradually over the years by individuals and corporate developers.
However, the corporate developers have been able to do so much because of active support from the Federal Ministry of Lands, Housing and Urban Development, in the watch of Ms. Ama Pepple. She travelled round the country to inspect and inaugurate thousands of homes, wherever they were being built.
Pepple left a policy framework behind that will guide future housing development processes if her successor does not dump it for whatever reasons.
Pepple left a policy framework behind that will guide future housing development processes if her successor does not dump it for whatever reasons.
The President of Nigerian Institution of Estate Surveyors and Valuers, Mr. Emeka Eleh sees a good future for tenants, stating that they will have a better deal if the supply of homes increases.
Eleh said the property market could not be regulated through laws since it was a function of supply and demand. He said, “The truth is that you cannot control the market in the way the government is trying to do. It is the same way you cannot legislate on naira exchange rate without allowing the market to find its level; same way you cannot legislate about a product you don’t have control over.”
Thus, he said government needed to address the main issues that affect housing delivery and they must address the issue of our laws, which are not investor-friendly for that category of investment. He stated that the economy is very bad and the default rate is high everywhere, but that it was higher in low income than in high-income areas.
Thus, he said government needed to address the main issues that affect housing delivery and they must address the issue of our laws, which are not investor-friendly for that category of investment. He stated that the economy is very bad and the default rate is high everywhere, but that it was higher in low income than in high-income areas.
“We have said it on several occasions and at different fora. We are not asking the government to subsidise housing forever. What we are saying is that housing must be in the preferred sector as part of the real sector because a boost in the housing sector is a big boost in the economy,” explained.
He wants the government to intervene in the housing sector the same way it intervened in the aviation sector, and in some other sectors that it should intervene in the housing sector. “It is not expected to build houses directly, but to create a mortgage environment that will enable developers build and to make it easier for buyers to purchase these housing units.”
Another issue he wants the government to address in housing supply is infrastructure. “Infrastructural development also creates a boom in the economy. Federal government’s projects are usually massive. For real estate, infrastructure is very important. In the suburbs, about 40 per cent of the money charged for buildings end up as infrastructure cost.”
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