Compared with other asset classes or market segments, the residential real estate market in many parts of Nigeria, including Lagos, Abuja, Ibadan and Enugu, remained strong and resilient to the impact of COVID-19, a recent half year report on Nigerian Real Estate Market shows.
This explains why, according to the report, the market recorded significant increase in enquiries and closed transactions in the first half of 2021 as against near-zero level witnessed at the peak of the pandemic in the corresponding period in 2020.
The reason for this increase, the report says, is the temporary redirection from investing abroad to more local projects, and the long standing housing deficit. “In an environment of uncertainty, bullish consumer sentiment displayed by local investors, combined with well-conceptualised projects, placed the residential sector as a defensive asset class that investors now embrace,” the report says.
Chudi Kalu, CEO, Middlechase Properties, confirmed to BusinessDay in an interview that the market has really seen significant uptick in transactions, pointing out, however, that it is mainly in the small and moderate-size family apartment units in mid-income neighbourhoods.
He recalled that “after the lockdown, we experienced a shoot-up in terms of demand for apartments. So, between that time and now, we have done over 54 allocations of apartments. That has scaled us up in a way compared to any other year. Currently, construction is going on; we are doing 128-unit apartments.”
Activities in the market segment have also increased, according to the report which was compiled by Northcourt Real Estate, a Lagos-based firm of estate surveyors and valuers with strong bias in research, consultancy, marketing and advisory services.
“Rendeavour, a city builder, and Unity Homes are expanding their partnership from Kenya to Nigeria with a 576-unit apartment development in the Lekki Free Zone in Lagos,” Ayo Ibaru, Northcourt’s COO and Director of Real Estate Research, noted.
He added that, coming off the success of Unity Homes’ 1,100-unit development in Kenya (Tatu City) and Rendeavour’s 5,000-acre development in Nairobi, both companies will be expanding in Alaro City, a massive new city scale development in Lagos.
Universal One is another project in Alaro City that will feature modern, family-friendly apartments with open- plan living rooms, balconies and contemporary kitchens.
The Federal Housing Authority (FHA) is also in the final stages of developing 900 units of low and medium-cost homes in Ibadan, Oyo State. The project will sit on 1,000 hectares of land at the Ajoda New Town in Egbeda Local Government Area along the Ibadan-Ife expressway.
The Lagos Home Ownership Mortgage Scheme (LagosHOMS) project launched 84, 132 and 360-unit developments in the Lekki, Surulere and Ikorodu areas of Lagos state respectively.
Ibaru noted that the Lagos residential market saw enquiries and closed transactions increase for two major reasons. One is the pandemic-induced need for larger apartments while the second is the erstwhile unavailable funds hitherto set aside for holidays and relaxation pursuits.
“The demand for gated estates within leading cities that intensified towards the end of Q4 2020 continued for much of H1 2021,” he said, adding, “our findings suggest a general decline in vacancy rates across Lagos and a spike in demand for assets in gated communities for security purposes and a better base in the event of another lockdown.”
He said that owners of luxury apartments remain unwilling or unable to move in and in order to adjust to shifts in market sentiment within this submarket, some developers have continued the ‘affordable luxury’ trend with smaller sized designs as demand has become rather effective.
Though the Miiddlechase chief executive does not see short-stay apartments as a sustainable investment asset class, Ibaru noted that it continued its aggressive growth in the period under review, adding improved concierge and management services.
“The Lagos State government and Echostone Development partnered to complete a 252-unit EDGE certified estate in Badagry,” he noted, advising that “the design and development of urban communities need to be based on the standard design principles and physical characteristics with consideration for location and connectivity, liveability, safety, privacy and facilities among others.”