Nigerians in Diaspora largely contributed to the growth recorded in the real estate sector over the years. This category of people was said to have boosted the operations of real estate companies and developers in the past years.
This was disclosed by the Chief Executive Officer, Richfield Limited, a real estate company, Samson Odegbami in a recent interview with Nairametrics.
He said, “A great number of my clients who found it difficult to invest in property or buy one when they were in Nigeria but found it very easy when they traveled out of the country, especially from Canada, United Kingdom and America.
”They found it difficult to send money to their relatives, as they have renewed their confidence in the operators of the sector. Over 50% of our revenue in 2020 were from Nigerians in Diaspora and that is a welcome development for the sector.”
Aside from the patronage from Nigerians abroad, Odegbami explained that the COVID-19 lockdown also boosted operators revenue in 2020.
Contrary to the assumption of some critics that the lockdown was a clog in the wheel of the sector’s operations, Odegbami told Nairametrics that real estate firms made more money at the time the economy was shut by the Federal Government to curb the pandemic.
He said, “We made more sales during the lockdown, as people were forced to stay at home. At that time, most of the clients that have been unreachable before COVID due to their busy schedule were forced to stay at home and they were the ones calling us for site inspection.
”A great number of them bought both landed property and house at that time after they had time for inspection.”
On ways to make money from the sector, Richfield boss added that his company has launched an investment platform called PropVest to boost innovative model for real estate financing.
According to him, PropVest was an income-generating investment platform designed to help individuals make short to medium term cash flow from real estate investment.
”The company would also help to provide the much-needed funds for real estate developers to help mop up the massive housing deficit in Nigeria.
“The real estate industry is a renowned sector that has continued to experience unparalleled growth over the decades. Out of over 206 million Nigerians, over 17 million people are still without a home.
“This is partly due to challenges that individuals face such as lack of funds to build, inflation resulting in constant hike in price of building materials and skilled labour among other issues. PropVest proposes a solution for all,” he added.
Odegbami added that the investment options start at an entry point of N150,000, spanning various investment cycles of between six to nine months with returns of 20%.
Why rents increased by 30% in Lagos, border towns
Factors responsible for the hike are rising cost of building materials, lack of transparency between asking and achievable prices.
Rents across Lagos (Mainland and Island) and Ogun State have increased by over 30% between December 2020 and April 2021.
Findings by Nairametrics revealed that while rent had increased by over 30% in some Lagos border towns like Sango-Ota, Arepo and Magboro, property owners across Yaba, Magodo, Ikoyi, and Lekki axis also inflated their rents by about 33% within the same period.
For instance, rents for one-bedroom (self-contain) and two-bedroom apartments, which are the most sought after in Magboro (one of the Lagos border towns) have increased from an average of N120,000 and N160,000 to N200,000 and N260,000 respectively. This represents a 33.33% and 30% increase respectively.
Similarly, rents in some key areas in Lagos Mainland are not cheaper. In Magodo phase 2, property owners charged between N1 million and N1.2 million for a 2-bedroom apartment, but now, a potential tenant is required to pay between N1.3 million and N1.56 million as rent (depending on how old the house is), an increase of approximately 30%.
Though rents appear relatively cheaper in Surulere, especially around Aguda, they also increased within the period under review. While rent on two-bedroom apartments and three-bedroom in Aguda has gone up from N850,000 and N1 million to N1.2 million and N1.4 million respectively, around Ogunlana drive, two-bedroom apartments that were let out at N950,000 now cost about N1.2 million.
Meanwhile, rents around the Lekki axis have also gone northward, as new tenants are forced to pay more before occupying houses. A 4-bedroom semi-detached house without boys quarters in Lekki Phase 1 and Ajah, which used to cost N3.8 million and N2 million, has risen to N4.5 million and N2.5 million respectively.
In Sangotedo, rent on three-bedroom flats has also increased from N1.2 million as of December 2020 to N1.6 million.
Why the rise?
Industry experts, who spoke with Nairametrics in separate interviews, explained that there are several factors responsible for the development and agreed that some of the reasons are not fundamentally strong.
Paul Bamigbola, Chairman, Nigerian Institute of Estate Surveyors and Valuers (NIESV), Lagos Chapter, told Nairametrics that a significant factor responsible for the hike is the rising cost of building materials.
According to him, property owners now spend more to build houses, as the cost of cement, iron rods, sanitary wares and tiles, among others, have all risen significantly.
For instance, the cost of steel, which was sold at N234,000 per tonne as of March 2020, had increased to N380,000 at the end of March 2021. This represents a 62% increase within the period under review.
Dangote Cement increased from N2,600 to N3,800 (though it is sold at N3,600 in some areas in Lagos), Lafarge Cement and BUA Cement increased from N2,400 and N2,250 to N3,600 and N3,250 respectively within the same period.
Bamigbola said, “The high cost of acquiring land, including the actual cost of building, also adds to the reasons property prices in Lagos are high.”
But when our analyst pointed out to Bamigbola that the hike also affected old houses, he said, “To also increase the rents, most of the owners of the old house renovate the houses a little before letting them out. They do that to increase the rent to about N400,000 if the owners of new houses charge N500,000.”
Another factor responsible for the hike, especially in Lagos, is the lack of formal housing. With over 3.8 million households in Lagos, up to 2.1 million households are without formal housing. This presents a supply gap of over 55%.
Chief Executive Officer, Richfield Limited, a real estate company, Samson Odegbami in a recent interview with Nairametrics said, “As typical in every market, excess demand drives up prices. This could make landlords, who frequently get requests for their available spaces, increase the prices and let out or sell the property to the highest bidder.”
Estate Intel, in its report, stated that the lack of transparency between asking and achievable prices was also another factor.
It added that the multiple agents and developers involved in marketing properties typically list these properties for significantly higher amounts than what they are willing to accept.
It stated, “We expect developers or agents to aim to achieve the highest possible price, with a window for negotiation, leaving a wider than usual spread between asking and achievable prices.
A large spread between asking and achievable rent makes average market rent seem artificially high and encourages other developers to hold fast on those artificially listed prices, keeping average rents or sale prices high.”
Based on the experts’ views, the rent prices could be very misleading, especially because most of the properties on the listed platforms in Nigeria are priced well above what is achievable.
Lagos commences enforcement against building collapse, substandard materials
The state government has moved to actualize its vision of zero tolerance for building collapse.
The Lagos State government said that it has commenced aggressive enforcement against quackery in construction to end building collapse in the state as it called for the support of building professionals.
This is as the state government has moved to actualize its vision of zero tolerance for building collapse.
This disclosure was made by the General Manager of Lagos State Materials Testing Laboratory (LSMTL), Mr Olufunsho Elulade, at its inaugural stakeholders’ conference with the theme, ‘Construction, Material Quality Control and Assurance in Lagos State, on Tuesday in Lagos.
According to a report from the News Agency of Nigeria (NAN), Elulade identified the use of substandard building materials and lack of adherence to quality assurance standards as the major causes of building collapse in the state.
He said the agency will immediately start standard enforcement in the building construction value chain to ensure the use of the right materials.
Elulade said, “We are, hereby, using this medium to state the terms of operations with all our stakeholders across the state; we want to partner with you to move the state forward in order to have safer Lagos for the benefit of all.’’
He emphasized the importance of doing away with the menace of quackery, substandard materials and corruption in the construction sector.
The LSMTL boss outlined the various services offered by its laboratory which includes soil tests, water quality assessment, calibration, destructive and non-destructive tests, among others.
While launching the new logo of the agency, Elulade, pointed out that it was a strategy to eliminate quacks and private laboratories using the agency’s old logo to impersonate its operations and mislead the public.
Also, the Public Relations Officer, Nigerian Institute of Builders (NIOB), Lagos Branch, Mr Olusesanayo Philip said the institute would sustain its public sensitisation campaign adding that the institute was also partnering with LSMTL to sensitise the public on the need to engage professional builders to tame the monster of building collapse in Nigeria.
What this means
The enforcement against quackery and the use of substandard materials in the construction value chain by the Lagos State government will come as a huge relief to residents and a boost to its fight against building collapse.
There have been numerous building collapse incidents in various parts of the state with attendant human casualties, due to the use of substandard materials or non-compliance with the state’s building planning laws and standards.
Nairametrics | Company Earnings
Access our Live Feed portal for the latest company earnings as they drop.
- Stanbic IBTC profit plunges by over 45% to N11.3 billion in Q1 2021.
- Nigerian Breweries Plc grows profit by 39% to N7.7 billion in Q1 2021.
- Trans Nationwide Express Plc profit after tax slumps by over 95% in Q1 2021
- FCMB approves FY 2020 dividend pay-out of N2.97 billion to shareholders.
- Africa Prudential Plc posts profit after tax of N381.35 million in Q1 2021.