Increasingly, landlords in the highbrow areas of Nigeria’s major cities are taking the hit as the exit of expatriates from the country in the wake of Covid-19 pandemic has started affecting significantly their rental income.
The rental market in the country has been particularly hurt with many tenants who have either lost their jobs or taken pay-cuts as a result of the impact of the deadly virus on workplaces and businesses are finding it difficult to pay their rents.
“It is a very dicey situation for landlords of these expatriates who left Nigeria thinking that the country wouldn’t be able to manage the coronavirus pandemic. Many of them may not come back again. Those who may come back may be doing so either later in the years or early next year.
“This leaves the landlords in a kind of dilemma because, for those whose rents are due for renewal, no landlord can say whether they will come back or not and it is not safe to rent out the apartments they were occupying. That means some landlords may lose money as a result,” Adeniji Adele, President, International Real Estate Federation (FIABCI), Nigerian Chapter, confirmed to Busin.
Adele noted that Coronavirus has impacted the rental market in more ways than one, explaining that the market may be bidding goodbye to yearly rent and ushering in an era of the short-let market where people will be renting apartments depending on how long they want to use the space.
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Chudi Ubosi, Principal Partner, Ubosi Eleh + Co, affirms, pointing out however that it is still early days to conclude on the return or otherwise of the expatriates. The impact of their exit is not being felt in the market yet; many of them are on yearly rentals and so, it is from next year during renewals that the impact will be felt. As for now, no,” he stressed.
Overall, it is a very difficult time for landlords and other property owners as the property market have seen a significant drop in both rents and sales prices on falling demand and dwindling household income, all occasioned by the devastating impact of coronavirus.
Countries around the world, including Nigeria, evacuated their nationals in other countries in the wake of the pandemic, leaving in their trail high vacancy rates. This affects properties in highbrow locations more and the situation is made worse by a depressed economy and excess product supply which clearly exceeds demand.
The United Kingdom and the United States of America are leading the pack of countries that have so far evacuated their citizens from Nigeria. Officially, both countries have evacuated 886 of their citizens from the country.
While the UK has taken out 546 of their nationals from Abuja and Lagos, the US airlifted 340 from Lagos. Altogether, the number of expatriates who have left the country is in excess of 1,500 and still counting.
These are expatriate workers in blue-chip companies and oil firms. They form the bulk of tenants occupying posh homes in Ikoyi, Banana Island, Ikeja GRA, Victoria Island and Lekki Phase 1 in Lagos. These foreigners also enjoy staying in highbrow areas in the federal capital territory (FCT) Abuja, and some locations in Port Harcourt.
Besides the exit of the expatriates, the pandemic has forced many local tenants to either downgrade or downsize their accommodations following job losses and pay-cuts. Many have therefore relocated from high end to low-end neighbourhoods.
Close watchers of the market expect that, apart from rent drop estimated at 50 per cent in Ikoyi particularly, there will also be a decay of real estate assets, and a significant decline in investment as investors may not see any attraction for moving cash to the market.
To make matters worse, the federal government is not enabling the market for private capital to come into real estate even though it is a growth enabler as confirmed by Andrew Nevin, Partner and Chief Economist at PwC.
“Not only is real estate sector one of the key sectors, but it is also the most important for Nigeria because it doesn’t matter what you do in agriculture, power or manufacturing, if those sectors do well and the real estate is not functioning, we are still going to have an economy that’s not working for Nigerians,” Nevin said.
He does not see commitment or capacity for the government’s planned intervention in the housing sector with the building of 300,000 units of affordable housing as a way of stimulating the economy.
“My observation is that the federal government recognizes the real estate issues but they continue to say they are going to build affordable housing for Nigerians and I don’t think that’s a credible story because the federal government doesn’t have resources to really fund this, and it doesn’t really have the capacity to do this in all 36 states,” he noted.
