Housing supply in Nigeria will likely stagnate in the days and months ahead, as dwindling demand and price correction which rattled developers in the first quarter (Q1) of this year may continue to discourage new projects.
The country’s property market has been struggling with low demand, falling prices and rising cost of construction in the last 12 months, forcing developers/investors to either review their project sizes or withhold investment and further development.
The first quarter of this year saw considerable price declines which analysts have described as price correct ion, and though this was most noticeable in the high-end market, Gbenga Olaniyan, a developer and estate surveyor and valuer, says all segments of the market were affected, including the low end.
“The high end is the most affected because the money isn’t there; the same thing is happening in the rental market”, Olaniyan adds, noting that some property prices have dropped by as much as 40 percent.” He gave example of a property which was on offer for $85,000 per annum, months back, for which the landlord is now ready to accept $45,000 if he finds a tenant ready to pay.
He further affirmed that, “supply will be drying up because people are starting to scale down project size. I have seen projects that have been stopped as a result of low demand.
“What is happening in the property market reflects the economic situation in the country”, explains Omochiere Aisagbonhi, President/CEO, Omais Homes. People are more concerned today with how to eat and be well, and not where to buy property, he adds.
Aisagbonhi, a developer with strong presence in the upper mid-income market, says he is not yet encouraged to do new projects and if he were to do more projects, he would scale down the size on account of cost.
Olaniyan who does not see the situation in the market improving before the end of next year, advises that those who must buy have to do so now because prices will rise in the near future.
He observed that in the first quarter of the year, there was an estimated 20 percent price correction at the high end market, which saw Grade A office spaces go for $850 per square metre, down from $1,000 and $1,100 per square metre by the last quarter of 2015.
“At the high end, apart from exceptional areas like Banana Island, Ikoyi, for instance, price has been flat. Some parts of this area have dropped; prime land in Bourdillon, Gerard and Kingsway Road, were at a point, selling for $350,000 per square metre, which matched Banana Island, but have dropped because people who bought at the time, did so to build three or four blocks of 24 flats each, but these are no longer selling or letting”, he said.
Conversely, at the low end market, property under N10 million and N20 million, especially for land in places like Ipaja, Ikotun, Abule Egba, etc, all in Lagos State, there was no drop, but for those at the very low end, below N1 million, there has been an increase of up to 20 percent, and this is because the so called 17 million housing deficit is mainly at that end of the market.
“The middle level has held the balance. There hasn’t been much movement, increase or decrease”, Olaniyan added, explaining that the townhouses his company was building for the middle class at N45 million has not fared well. “We would have sold at N45 million last year. The profit margin for developers have reduced because they can’t sell for more than they sold last year”, he reasoned.
CHUKA UROKO
Join BusinessDay whatsapp Channel, to stay up to date
Open In Whatsapp
