Inflation, demand push up rent for 2-bedroom apartment 200% in 5years

Rising inflation in Nigeria coupled with growing demand have pushed up rent for 2-bedroom apartments by 200 percent in the last five years, Bismarck Rewane, CEO, Financial Derivatives Company, has said.

Within the same period, Rewane, who spoke at the monthly Lagos Business School Breakfast Session for May, noted that official inflation has increased by 93.88 percent, adding that anecdotal evidence is much higher, even though subsidy is under-estimating the level of inflation in the country.

He recalled that, as of May 2017, rent for a 2-bedroom flat in mid-income settlements like Ilupeju and Surulere in Lagos was N400,000. But today, that same size apartment in the same location goes for N1.2 million or more per annum.

BusinessDay finding shows that of the five year period, 2021 had the highest rate of increase in rents across the board. That was the year, precisely in March, when the country’s inflation figure peaked at 18.9 percent.

This impacted negatively on commodities, including building materials, whose prices were pushed to unimaginable levels. Cement and rods, which are major building materials, recorded high price increases that translated into rent increases, especially for 2-bedroom.

Across Nigeria, cement prices went up significantly. In Lagos, for instance, Dangote Cement increased from N2,600 in October 2020 to N3,800 or N3,600 in some areas in April 2021; Lafarge Cement and BUA Cement increased from N2,400 and N2,250 to N3,600 and N3,250 respectively within the same period.

Within the same period, while rent increased by over 30 percent in some Lagos border towns like Sango-Ota, Arepo and Magboro, property owners across Yaba, Magodo, Ikoyi, and Lekki axis also increased their rents by over 33 percent.

For that reason, rents in some key areas in Lagos Mainland like Magodo Phase 2 where property owners used to charge between N1 million and N1.2 million for a 2-bedroom apartment, but now, a tenant is required to pay between N1.3 million and N1.5 million as rent, showing an increase of about 30 percent.

Read also: April’s inflation rate hits 16.8%, highest in 8 months

An analysis of a recent study of highbrow locations in Lagos, especially Victoria Island, with a sample pool of 428 apartments, shows that over 369 units have been sold. Further analysis of the units sold reveals that they comprised 38 percent of 1-bedroom apartments, 43 percent of 2-bedroom apartments while 19 percent of 3-bedroom apartments. This shows that a 2-bedroom is the icing on the cake.

The study, which was conducted by MDS Properties Limited interviewed 10 top-tier real estate developers and brokers operating within the Victoria Island axis, identified six major reasons for the significant uptick in demand for 2-bedroom apartments within the area.

David Mba, Founder and CEO of the company, told BusinessDay that the growing demand for this house-type is driven by six factors including owner-occupiers looking for a Pied-a-terre in the central business districts (CBDs) and older couples downsizing to more efficient spaces.

“Corporate entities accommodating their expatriates in short-stay homes where they can pay weekly, monthly or quarterly as opposed to yearly which they did before, also contribute to demand. “This has shifted the focus of investors to 1 and 2-bedroom apartments for short-let tenants,” Mba added.

He said that the demand is also driven by parents gifting their children these apartments; young families starting out, and the steady rise in the number of first-time home buyers who prefer relatively more affordable apartments.

Segun John-Adejumo, the managing director of Precioso Homes which specializes in building small-size housing units such as 1-bedroom and 2-bedroom for short-let and long-stay tenants, added that demand for these house-types was also driven by people who haven’t owned their own homes.

“When you cannot afford to buy the kind of house you want now, you buy a smaller one for investment purposes and watch the investment build your own income stream and capital after which you can fund what you genuinely want. Such people buy from us,” he explained.

Besides housing, food stuff and other essential commodities are also major victims of Nigeria’s run-away inflation that has not only eroded the value of household income, but also put projects on reverse gear.

According to Rewane, prices of basic household needs such as diesel, flour, bread, rice, fish and chicken have gone up significantly by 242.11 percent, 154.77 percent, 100 percent, 146.15 percent, 144.44 percent and 108.33 percent respectively.

He explained that diesel which was sold for N190.00 per litre in 2017, now sells for N650.00 per litre; a loaf of bread sold for N300.00 now sells for N600.00; 50kg bag of rice sold for N13,000 now goes for N32,000; 1kg of fish was sold for N900.00 now sells for N2,200 while Ikg of chicken that sold for N1,200 now sells for N2,500.