How do we solve the problem of surging property prices in Lagos?

How do we solve the problem of surging property prices in Lagos?

How do we solve the problem of surging property prices in Lagos?

4th August, 2022

3 minutes, 28 seconds read

As Nigeria’s macroeconomic conditions keep changing, consumer preferences and purchasing decisions are affected. This includes investors who are looking to acquire assets for investment purposes. With real estate being the biggest asset class globally, and the largest investment owned by most individuals, changes in property price especially at the rate we see here in Nigeria; where there is little or no mortgage access raises concerns.

As property prices continue to surge alongside the current inflationary pressures within the Nigerian economy, buyers have begun asking questions about the sustainability of the Nigerian real estate market and likening it to a Ponzi. We analyzed 5,000 properties over the past 12 months across different locations in Lagos and saw a 24% YoY inflation in the price of properties that are available for purchase in Lagos as of June 2022. While these are asking prices, and subject to negotiation, the demand-supply mismatch within Lagos means leaves the bargaining power in the hands of the supplier and hence sale price ends up being the asking prices or at least very close. What is even more interesting is that in some locations, the average surge in the price of properties listed on our platform almost doubled.

If the market forces were the only determinant of the price index, you would expect that price increase would correspond with inflation at 18.6%. In advanced climes, annual property sales price changes typically do not go beyond 10%. For instance, asking prices for properties advertised for sale in the UK within the past year were 9.3% higher than a year earlier according to Rightmove, UK’s largest property portal. In rare scenarios where there is hyperinflation, or where the economy has consistently seen healthy growth, annual property price changes can go as high as 15% in mature markets. Due to the peculiarity of emerging markets such as Nigeria, prices can be expected to go as high as 15% but this does not justify the hike we have seen in the past year.  Of course, the construction material costs drove prices up, but market sentiments, lack of price regulation, and the opaqueness of Nigeria’s market specifically are putting buyers at a disadvantage when making offers. 

The effect is a further drop in ‘property purchasing power’, and buyers are compelled to change location preference or downsize. Estate agents are beginning to see this, a number of prospective buyers who can no longer afford Lekki Phase 1 for instance, default to buying similar-sized project in neighboring locations with Ikate being the first option. Even in the land market, a similar narrative has played out. For example, increasing land prices in Ibeju-Lekki and surrounding has forced prospective land owners to explore other locations, with Epe being the most nascent location typically considered. Where the buyer insists on buying a location but prices have gone up, the next approach is usually to downsize on their preferred property size.

On a larger scale, the industry has begun experiencing capital flight due to speculations of instability in the rate of capital appreciation in Nigeria. For established investors, the spike in property prices raises concerns on volatility. Institutional players would typically prefer relatively ‘‘less-yielding but stable assets’’ to ‘‘high-yielding assets in very volatile markets’’.  This particular factor has pushed a number of Nigerian investors to seek investment opportunities in more stable markets with the United Arab Emirates’ residential and hospitality market making the top of the list of alternatives, alongside Accra and Rwanda.

The clear imbalance in demand and supply across the country shows that there is a need for some guardrails to cushion the volatility, especially in Lagos. The demand is growing exponentially and supply is unable to catch up. Nigeria currently has over 28 million housing deficit, with an annual population increase of 5 million. While the effective demand is much less than this number the combined supply efforts of both the government and private sector to date, are only able to deliver between 250,000 to 300,000 houses annually

In summary, there is a need to protect the industry through a balance on real estate capital appreciation vs shrinking investment portfolios. Should the forces of demand and supply determine the price of properties? We think so, but we also think that deliberate efforts should be put into price setting to manage the volatility.

As we wrap up this note, take some time to read our earlier residential price index article from last week and share your thoughts with us. We would love to hear your views, please send us your comments and feedback to research@buyletlive.com

Do you have any property that you will like to list for sale, rent, or shortlet? You can click here to create a free account and advertise your properties on BuyLetLive for free. You can also send an email to our operations team at info@buyletlive.com.

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3rd August, 2022

2 minutes, 11 seconds read

BuyLetLive in Capacity Expansion, Names Industry Expert - Modupe Agbolahan COO

BuyLetLive expands its team with the latest appointment of a new Chief Operations Officer, Modupe Agbolahan to its management team. Astute leader with business acumen in real estate and property marketing, Modupe brings onboard a wealth of experience in building sustainable stakeholder partnerships and brand loyalty.

Until recently, she was the Assistant General Manager at Realhouse Communications Limited where she delivered rapid market adoption of Castles Lifestyle Magazine and grew the portfolio to N100M Annual Recurring Revenue. She led the team to achieve excellent customer service to over 10,000 real estate practitioners earning the title “Nigeria's premier real estate magazine”.

Announcing the onboarding, Olorunsola Awolola, the Chief Strategy Officer, said, Modupe’s appointment will support the accelerated execution of BuyLetLive’s ambition and 3year growth trajectory to dominate the Market through Partnerships and excellent Customer experience. “As a real estate marketplace, BuyLetLive is a safe meeting point for stakeholders in the ecosystem. Our users are at the core of everything we do. It is why we harness resources from the best available to ensure we deliver on our promise”.

“I am very happy to be joining this family. I have seen the active commitment and passion of the teams to addressing user pain points in property search for rentals, finding short lets and outright purchases. The team relies on profound market insight, adopting user research for concrete strategy. All that we do is from a place of commitment to our customers. I am ecstatic to be a part of this and we will do ground breaking things!”

Modupe has a strong background in commercial strategy, consumer marketing, customer service, brand building and customer analytics, a great addition, especially with the massive growth the platform has seen over the last few months.

As the Chief Operating Officer, Modupe will oversee marketing and operations, while Olorunsola will now oversee technology and product developments. This promotes the goal of BuyLetLive as a proptech platform giving the best experience in property search made easy. 

At the press conference, Olorunsola announced the release of the BuyLetLive Mobile App and state other plans in the blueprint for improved property search. We started operations 8 months ago with only the web application. This was a deliberate approach to understand our users. More importantly, we needed to study their pain points and build what really is value to them. We are happy to announce that the app will improve agent upload sessions by 40%. Of course, for those who request a more personal touch, we have a dedicated customer service team and an active web chat to directly receive feedback, enquiries, and special requests from customers.

About BuyLetLive: BuyLetLive’s mission is to simplify, digitize and streamline the buying, selling and rental experience for the real estate ecosystem in a user-friendly interface, using top-quality photos to view. They give prospects peace of mind by verifying agents on the platform and offer VAS services that ensure that their customers find the process of searching and settling into their new homes, seamless.


28th July, 2022

2 minutes, 30 seconds read

Top locations to rent 1 Bed Apartment of less than 1 million naira in Lagos

If you are a young professional living in Lagos or planning to relocate to Africa’s megacity, one crucial financial responsibility to consider is accommodation. Our rental price index note highlighted that the average asking rent for apartments in Lagos has increased by 20%+ over the past year. This was based on an analysis of a pool of listed apartments, comprising 1 bedroom, 2 bedroom, 3 bedroom and 4 bedroom apartments in multiple locations in Lagos. While rental prices have increased across board, there are still a few locations where young people can find decent apartments with rental values below one million naira per annum.

In this article, we have profiled and ranked locations where annual rental values for 1 bedroom apartments are still under one million naira, and what makes them attractive for young renters. We adopted a number of metrics including infrastructure, average rental price, availability of power supply, proximity to the CBDs, and overall security/neighborhood serenity in ranking these locations.

Ikeja GRA

Ikeja emerged as the top location to rent a 1 bedroom apartment in Lagos. Based on our property inventory within Lagos’ capital area, the average asking rent for 1 bedroom apartments in Ikeja is N800,000 per annum. So far, Ikeja is one of the areas with decent road infrastructure in Lagos with a modest electricity supply compared to the other locations under consideration.

Gbagada

Ranking second on the list was Gbagada. The average asking rent for 1 bedroom apartment in Gbagada is N650,000 per annum. Outside the fact that the neighborhood has a very decent power supply, Gbagada also has quick access to the Island through the Third Mainland Bridge and the rest of the Mainland through Oworonshoki-Oshodi Expressway. The quality of power supply, affordability, centrality, and accessibility of the neighborhood all come together to make it a choice location to rent an apartment.



Magodo

The average asking rent for a 1 bedroom apartment in Magodo today, is N800,000 per annum. Among other things, Magodo is most notable for its serenity and the decency of the apartments within the estate. Magodo is one of the affluent neighborhoods on the Lagos Mainland, a well-organized estate which has since been modernized and now hosts some of Lagos’ most affluent and middle class.

Yaba

Yaba has over 8 tertiary institutions and a number of technology hubs within it attracting a large population of young people. Due to its proximity to Victoria Island and other business areas in Lagos where the bulk of young people in Lagos work, Yaba is dubbed a residential hub for the younger demographic. As of today, the average asking price for 1 bedroom apartments in Yaba is N700,000 per annum and based on our ranking, Yaba is the 4th best location to rent 1 bedroom apartments for less than 1 million naira in Lagos.

Surulere

Surulere is perceived as a middle-class neighborhood in Lagos supported by pockets of industrial and residential activities. Young people and the middle class in Lagos now like to live there because of its relatively centrality and close proximity to Lagos Island and Victoria Island.  Based on our database, the average rent for 1 bedroom apartment in Surulere is N650,000 per annum, and Surulere ranks 5th in our list of top locations to rent 1-bedroom apartments for less than 1 million naira in Lagos.

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