Demand for flats, terraces rise as slow economy weakens housing affordability

The slowdown in the Nigerian economy has continued to impact on transactions in the housing market with both demand and supply favouring multi-family units such as flats and terraced houses, which are considered relatively more affordable.

Nigeria’s economy is in dire straits and symptoms of its weakening macroeconomic environment are reflected in foreign exchange shortages, slowing GDP growth rate and rising inflation, which is, increasingly, shrinking income at both household and organisational levels.

Actual demand in the housing market therefore, has moved from the high end segment of the market where properties are valued above N60 million to the lower-to-middle market segment where properties are valued from N12 million to N50 million.

“Affordability is today a big issue in the market. The issue of affordability means that flats and terrace houses are in greatest demand,” Munachi Okoye, MD/CEO, MCO Real Estate Limited, said.

“However, a canny developer is always seeking to get the right balance between cost of land and localised demand for different house-types, quality of finish, profit and speed of sale, and it is the successful developer that is able to strike the right balance between these to deliver an optimum return,” Okoye added.

Increasingly, developers are also responding to the changing market demand, leading to quite a good number of them playing at the high end market to review their portfolios and scale them down.

“We are responding to market demand and also to realities in our economy with a new project through which we want to deliver 120 units of luxury apartments; we had not done apartments before. This is the first time and it is our response to the yearnings in the market,” Olumide Osunsina, MD/CEO, Megamound Investment Limited, said recently.

According to him, climbing the property ladder is extremely difficult for most families in Nigeria today, which was why they came up with the new project known as County Apartments.

A new report estimates that flats make up over a third of all new housing units delivered annually into the market, giving it the largest share over other house-types and, in the opinion of close market watchers, this house-type also makes more economic sense being more profitable, and also attract quicker sales.

“Developers, depending on the size of land available to them, often want to utilise the full value of the land to the last penny,” explains Omorotimi Akinlose, MD, Residential Auction Company (RAC), adding that they often encourage architects to come up with designs that can provide as many units optimally possible to increase the bottom line.

A developer who does not want his name mentioned confirms that flats and terraced houses are in higher demand, citing a 24-unit project that his company delivered in Lekki which, he says, were sold out at N24-N26 million per unit before they were roofed.

“This trend is now very common in the market for developers to adopt,” Akinlose notes, explaining that the emergence of terrace, town house and maisonette house-types commonly seen in the western markets are now a fast growing trend amongst local developers looking to attract a younger generation of clients that favours such house-types rather than the conventional detached and semi-detached house-types. Like flats, these house-types also take up less built-up area, making them cost-effective for plot sizes.

Lekki remains the haven for new housing development in Lagos, which explains the fact that of the estimated 3,929 new units delivered into the market last year, 3,203 units, representing 82 percent, were located in Lagos Island and of this too, 2,579 units, about 66 percent, were located along the Lekki-Epe axis.

CHUKA UROKO