Unrealistic prices, falling demand, better alternatives, poor infrastructure and change in accommodation strategy by major buyers of real estate are some of the reasons why the Ikoyi property market continues to struggle for recovery and return to pre-global market crisis prices.
As an exclusive settlement in Lagos, Ikoyi is over 90 percent residential and has unique characteristics being a high end market populated by expatriates and high net-worth individuals.
The major characteristic of this market is high property price which analysts say is unrealistic, insisting that the bulk of the high vacancy rate in this market is largely as a result of its unaffordable prices.
A developer who did not want to be named confirmed to BusinessDay that Ikoyi is down because the infrastructure is bad, while there are a lot of private estates that are well finished like the Nicon Town, Megamound Estate and so on all of which can compare with Ikoyi.
“The Ikoyi market will continue to struggle because prices in this market have hit the top and can only come down from there. For an investor, Ikoyi may not be the right place to go for now; the market has hit the top and is going to remain there for a long while,” he added.
According to him, “Ikoyi is where you see a house and there is no good road, water or good drainage system, yet the price is put at N160 million (about $1 million).”
“Another reason why the Ikoyi market may struggle for long is that the major users of real estate have now redesigned their strategies. Companies like Shell, Total etc now go into special agreement with their staff to take money and rent their own houses by themselves, just like the federal government’s monetization policy,” he continued.
He stated that a lot of the vacant properties in Ikoyi are victims of this new arrangement by oil companies, adding that these companies also buy houses for their staff through mortgages and pay the interest for them.
“All these are cost-cutting strategies by the companies and they are affecting the real estate market,” he said.
Ikoyi was over-priced during the boom days of the property market. This was an area where rents were also dollar-denominated. Land carried price-tags of between N500 million and N1 billion and people were buying, then.
The developer pointed out however, that the challenges in the high end market does not affect the lower and medium income market which is very vibrant, noting that “places like Surulere, Gbagada, Ikeja GRA, Maryland, which are mainly rental markets and middle class settlements still remain robust markest. You can hardly find a vacancy easily there. This is because properties are properly priced. If there is any vacancy, people will be queuing to take it up. So, the vibrancy in these markets is to be expected,” he said.
He said that “because property market is not a product, you cannot do a kind of re-launching.
The only relaunching that can be done on Ikoyi is providing infrastructure like what Tinubu did in central Lagos. It is the only way that the market will be made a little bit interesting. Unless this is done, the market will be down for a long time.”