House rents are soaring in Lagos suburbs, where over 60 percent of the city’s estimated 20 million residents live, opening up opportunities in the rental segment of the property market for investors with patient capital.
For reasons bordering on galloping inflation, rising building materials costs and general downturn in the economy, supply of new buildings has dropped amid rising demands. Landlords need a lot of money to maintain existing houses and also pay bills, leading to increase in rent.
Though the rent increase cuts across various locations including low, middle and high-end or highbrow, it is more pronounced at the outskirts, which are melting pots for renters fleeing from high rents at the city centre.
Places like Itire in Ijesha, Ago Palace Way in Okota, Egbeda, Ikotun-Egbe, and Isashi in Ojo have been major receivers of tenants who are changing address from mainly mid-income locations like Surulere, Ilupeju, Gbagada, and Magodo.
Victoria Anichebe is a Lagos resident living in the Ilupeju area of the city. She wants to relocate to Ago Palace Way after losing her husband and their economic fortunes changed such that she can no longer afford the Ilupeju rent.
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“I went to Ago with the intention to rent a two-bedroom apartment which I considered enough to take me and my four children. But to my surprise, that size of apartment goes for between N1.2 million and N1.5 million per annum, depending on the age of the building,” Anichebe told BusinessDay.
She lamented that the high rent she was running away from at Ilupeju has become her major challenge, explaining that the choice of Ago for her new home was because of the business opportunities the area offers. “Where do I go from here?” she queried.
Ago, as it is popularly called, has become a preferred destination for many Lagos renters because of its good access road and the opportunities it offers as a residential and commercial enclave populated mainly by business men and women from the eastern part of the country.
Before now, a three-bedroom flat in Okota was rented for about N600,000 per annum as against N800,000 which the same size property would go for in Ajao Estate or Festac Town, which are neighbouring areas to that location.
Also, a mini-flat was rented for between N250,000 to N300,000 per annum in some parts of Okota, while the same size apartment went for a minimum of N400,000 at neighbouring locations.
An estate manager who operates in that axis told BusinessDay that Okota is now a good destination for investment in rental apartments and shop spaces, especially along Ago-Palace Way where, according to him, renters are just waiting for any house or shop that would come to the market for rent.
Aloysius Odoabuchi, a property lawyer in Okota, said: “Many property investors and real estate developers are already taking position, building in Okota, especially along Ago-Palace Way because demand has really gone up within the community.”
Similarly, in Egbeda, another suburb, rents have gone up by over 30 percent in the last couple of years, according to an official from Ubosi Eleh + Co, a firm of estate surveyors and valuers.
According to the official, a two-bed room apartment in that axis now goes for between N1.6 million and N1.8 million per annum, up from between N1.2 million and N1.4 million just two years ago.
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Obi Nnabuife, a bank worker, corroborated this. He told BusinessDay that he had been looking for a two-bedroom apartment to rent in Egbeda in the last four months and the least he has seen so far goes for N1.7 million per annum.
“This is besides what they call agency and agreement fees each of which is 10 percent of the rent value. My worry is that many of the apartments I have seen don’t meet my expectations. Upon that, I have been disappointed three times by different agents who come back to tell me ‘the apartment has been taken’,” Odoabuchi said.
“This story runs across many of the places we consider suburbs because these areas now have many people coming in from the city centre,” he said, citing a landlady in Egbe in Ikotun area of the city who, he said, sent away two tenants who occupied two 2-bedroom flats in her house.
He added: “This landlady converted the two flats into four one-bedroom self-contained and, as against the N200,000 per annum she was charging for each of the former two-bedroom flats, she now charges N250,000 for each of the one-bedroom self-contained.
“That means she now gets N1 million annually from the same space she was getting just N400,000 yearly. This gives you an idea of the kind of opportunities we have in build-to-let apartments in most of these suburbs.”
