Housing supply in five-year high, rises 15% to 3,929 units in 2015

Despite a tough macro-economic and political environment which characterised 2015, residential housing supply to the property market within the year, reached an five-year high of 3,928 new housing units, which was 15 percent higher than the previous year’s output, estimated at 2,523 units.

This is considered the highest housing supply in the last five years, lending credence to analyst’s submission that new supplies contribute significantly to the high vacancy rate, which the housing market has seen in the last six to 12 months.

Emeka Eleh, immediate past president of the Nigerian Institution of Estate Surveyors and Valuers (NIESV) had explained to BusinessDay that falling oil price, naira devaluation and new developments coming into the market, accounted for the high vacancy rate, said to be approaching crisis point at the high-end residential market in major cities of the country.

Lagos, Nigeria’s commercial nerve centre is considered the country’s real estate development hub and this explains the quantum of developments in the city in 2015, when an estimated 3,929 new units were delivered into the property market.

In its recent report on ‘Lagos Housing Developments’, Residential Auction Company (RAC), explains that of the 3,929 housing units delivered in 2015, 82 percent, which is about 3,203 units were located in Lagos Island, and of these, 2,579 units, about 66 percent, were located along the Lekki-Epe axis, making that location to have the largest proportion of new housing units in the city.

Omorotimi Akinlose, RAC’s managing director, explained to BusinessDay that Ikoyi and Victoria Island accounted for 10 percent and 6 percent respectively of the total delivery, noting that, “on Lagos Mainland, Festac Town had the highest number of new units delivered, due to a high rise development by UPDC; this was followed by Yaba and Ikeja GRA which accounted for 3 percent and 2 percent respectively”.

  According to the report, in the last five years, slightly over 15,140 new housing units have been delivered into the market, giving an average of 2,523 units per annum. The report added that the supply of new units within this period increased by a staggering 140 percent.

Though this is a significant feat in an economy with a very difficult operating environment, analysts say it is still a drop in an ocean for a country with a yawning housing demand-supply gap, where the World Bank estimates that one million housing units need to be built annually for the next 20 years, to close the gap. 

Akinlose however pointed out that though 2015 witnessed the highest number of new deliveries, the highest number of construction starts did not happen same year, but rather in 2014 with a record breaking 8,013 new housing units which was the highest in the last five years.

“The housing development market was at its peak then, as developers moved to site to embark on various mass housing projects. This pattern of growth did not continue in 2015 as the number of new housing units launched, dropped by 71 percent and plummeted to 2,307 units, making it the lowest recorded over the past five years”, Akinlose said.

Construction starts, he explained, is a measure of new housing units launched on an annual basis and is an important indicator of just how buoyant and active the housing development market is. He further explained that the sharp drop in construction starts seen in 2015 could be attributed to the changes in the country’s political and macro-environment.

“The government’s anti-corruption stance has stemmed the inflow of embezzled government money into the real estate market, thus severely affecting the source of funds for some developers, who in the past depended on such proceeds”, he noted.

He added, “it has also made it difficult for some developers to access loan finance from financial institutions, as a result of the liquidity freeze and lack of credit facility in banks, owing to the implementation of the TSA”.

CHUKA UROKO