Why real estate in other states cannot match Lagos

Why real estate in other states cannot match Lagos

Why real estate in other states cannot match Lagos

9th September, 2022

4 minutes, 0 seconds read

In many African countries, there seems to be an imbalance in the spread of growth seen in commercial cities compared to the rest of the country. By this, we mean in terms of GDP across all sectors and industries. Looking critically into the real estate market there’s an obvious gap that keeps widening even further. For instance, the performance of the real estate market in Cairo, Nairobi, Cape Town and Kigali, far outstrips what you will find in other states in Egypt, Kenya, South Africa and Rwanda respectively, and the list goes on.

This is understandable, and even in Nigeria, there is a much bigger and more obvious disparity. Except for Abuja, of course, the playground of the country's big wigs (expatriates, diplomats and high-net-worth individuals), and Port Harcourt, the country's oil hub, no state’s real estate market can boast of anything close to what Lagos does. This is interesting because even in other African countries, especially South Africa and Egypt, the gap is not as wide as what you will find in Nigeria. For example, there is still a close match in real estate market performance in Capetown, Pretoria, Bloemfontein, Limpopo, Mpumalanga and a few other provinces across South Africa. 

While Lagos is definitely getting a number of things right, the uneven allocation of key national resources puts the state in a very advantageous position over others. A number of factors explain this tilt:

Lagos’ economic prowess makes it a difficult match

Lagos is home to Nigeria’s Financial Services Sector, a major hub for the Capital and Money Market housing 97% of Commercial Banks’ Head Offices and over 200 financial institutions operating within the state. Lagos is referred to as the commercial nerve of Nigeria. The state also boasts of 29 Industrial Estates and 4 Central Business Districts, attracting over 70% of Nigeria’s industrial investment. It is also home to the nation's chief ports including the Apapa and Tin Can Island ports that receive up to 70% of total national cargo freight. 


In terms of entertainment, aviation, and even financial performance, Lagos also leads the rest of the country. Over 50% of Nigeria’s Public Telecommunications operators (PTO/GSM) are residents in Lagos, and this city also has the busiest international/regional aviation hub in the country. For context, the Murtala Mohammed International Airport, Ikeja attracts over 70.61% of international and 58.30 % of domestic traffic, and Lagos’ Internally Generated Revenue accounts for over 60% of the State’s annual budget, no state in the country does anything close to this.

Of course, real estate market performance draws so much from what is happening with the overall economy. Lagos, in particular, has been able to thrive in real estate, largely because other sectors of the State’s economy are working, at least, better than the rest of the country. In the real sense of it, Lagos is not only big in the context of Nigeria. The City is also one of the largest economies in Africa. But there’s more to why Lagos keeps leading the rest of the country in real estate performance. Let’s get a little deeper.

Lagos occupies only 0.13% of Nigeria’s 923.768 square kilometre land area but houses more than 10% of the country’s population. This seemingly small city’s GDP is reportedly more than 30% of the country's GDP. However, in terms of real estate performance, some key factors put its real estate market in a more advantaged position. One of those is the quantum of its budget that goes into infrastructure.

 In terms of budget, Lagos spends more on infrastructure than any other state in the country

Infrastructural development to a large extent influences the real estate market and is one of the biggest value drivers across all real estate subsectors. People who are looking to buy properties either for owner occupation or for investment need to be certain that there is access road to the property, electricity connection, water supply, and good schools for their kids. In terms of what goes into infrastructure projects, Lagos spends over 18% of its annual budget building roads, bridges, and everything that makes life conducive for its residents. Compared to the rest of the country, this is over 152% more than the percentage spend for other states in 2022 and 122% more than the percentage spend on the national infrastructure budget.

Investors need returns, and like every other investment, people who are deploying capital in Nigeria’s real estate market, will only do so in States where there is economic traction, and Lagos happens to be that state in Nigeria. As the real estate market in Lagos reaches its peak, there is a dire need for real estate markets in other states need to grow much more. So, what is the Way forward?

 Closing thoughts

 We need to open up other cities for growth.  Nigeria needs new models of development and infrastructure allocation. The presence of infrastructure and the overall economic impetus of a region is the fuel needed for real estate to thrive. To achieve this in other states in Nigeria, we need to democratize the allocation of core resources. By doing so, we are helping Nigeria's second-tier cities to reach their full potential, and once this is achieved, economic opportunities will be extended throughout the nation, and the real estate market in other states can begin to see more traction.

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5th October, 2022

3 minutes, 7 seconds read

Top 3 locations to live as a young family in Lagos

The factors that people consider when deciding on where to live vary with the different stages of life of the individual(s) involved. Things like cost, taste and fashion, proximity to work and family e.t.c are top on this list of factors depending o demography, income level and lifestyle. For instance, the availability of clubs, restaurants and other lifestyle amenities, maybe a major consideration for a young person who enjoys nightlife. On the other hand, a 70-year-old retiree would most likely be more concerned about living in a safe neighbourhood with quality healthcare facilities.  

There are many things to think about and prioritize when choosing a place. Typically, your commute time and, ultimately, the quality of life for you and your family, are influenced by where you reside. Some factors are more readily apparent than others. For young families, figuring out where to live and raise children, especially in “the busy Lagos” can be challenging. We have considered a number of factors, including the availability of quality schools, recreation and health facilities, among others and have profiled the best 3 locations to raise a family in Lagos. While there might not be a perfect location that satisfies all of your demands, hopefully, these suggestions will help you make an informed choice that is right for you.

Lekki Phase 1

Lekki Phase 1 emerged as the number one young-family-friendly location in Lagos State. Historically, Lekki Phase 1 has built a reputation for housing some of the best schools, hospitals and recreation centres in Lagos. Towards the end of 2021, Edusko, an education marketplace did an analysis of top schools in Lagos based on their performance in the international and national examinations, performance in both local and international competitions (academic and extracurricular), as well as their alumni achievements in recent years. Based on the analysis, Lekki Phase 1 houses 31% of the schools that fall within the top 25 schools in Lagos. With respect to healthcare, Lekki Phase 1 is also home to approximately 13% of the top 25 hospitals that we profiled in Lagos. Additionally, Lekki Phase 1 also has more than 20% of family/kid-centric recreation centres in Lagos including Upbeat and Fun Factory.

Ikeja GRA

Coming second on the ranking is Ikeja GRA. The Government Reserved Area is particularly notable for housing some of Lagos’ best hospitals and clinics, including the recently launched 72-bed Duchess Hospital on Joel Ogunnaike Street. Other notable hospitals in the neighbourhood include Reddington Hospital, Eko House Hospital, and Genesis Specialist Hospital, among others. Based on our analysis, Ikeja GRA is home to 12.5% of Lagos' best schools, 25% of the State’s best hospitals, and up to 20% of the City’s best recreation centres. Outside its serenity and good road network, Ikeja also has the most family-friendly restaurants, grocery stores and a lot of fun places for you and your young family to bond.

Ikoyi

Ikoyi is notably expensive, but if you are looking for a place where your kids can meet the children of the big wigs in society, then it might just be the best place. Gleaning from our analysis, Ikoyi emerged as the 3rd best location to raise a family in Lagos. With 9.4%, 12.5% and 20% of the best schools, hospitals and recreation centres respectively located here, Ikoyi is an ideal location to raise kids, with a quality of life that is almost at par with what you will find in some of the most advanced cities around the world. 


Closing thought

Barring concerns about high rental/property value, and some other personal nuances, Lekki Phase 1, Ikeja GRA and Ikoyi are the top 3 locations to raise your family in Lagos. In the end, the location you choose will be the one that checks off enough of your own requirements. Having said that, we hope that some of the three factors we've outlined in this piece will be helpful to you the next time you're trying to pick where to reside.

If you are looking to rent or buy an apartment or get a shortlet, go to BuyLetLive.com and find properties that meet your requirements. If you are an agent, developer or landlord, visit the signup page on BuyLetLive.com to create an account and advertise your properties.

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26th September, 2022

2 minutes, 52 seconds read

Surging Inflation and how it is impacting the Lagos Residential Rental Market

In the last 12 months, Nigerians have referred to the economic situation as very daunting, especially for new renters in Lagos. With inflation surging over 20% in August 2022, the economic climate has not been very favourable for most low to middle-income earners in Nigeria. As the rising cost of goods and services continues to drive people to spend more in exchange for fewer items, Nigerians are constantly looking out for opportunities to cut down their expenses. 

One way we have seen this play out is in regard to new leases. Over the last half year, our interaction with real estate agents in Lagos has shown that existing tenants who before now considered moving to new apartments are reconsidering. The reasons for this move seem obvious. Cost! When we dug deeper, we found out that moving at this time can cost you almost twice what it will take to continue in your current space, and prospective renters have come to this realization. But why is this?


Rent has surged over 20% in the past 12 months.

If you are looking to rent a new apartment, it is most likely that you will spend 20% more for the same type of apartment in the same location than you would have one year ago. For tenants who have stayed long in their old apartment, the percentage increase will likely be more than that. Where the apartment is newer, especially with modern amenities, the additional premium being charged by Developers and Landlords can go as high as 30% or more depending on the location. When considered holistically, this additional rental burden is a major discouragement for people looking to relocate or move into newer apartments.


Agency commission, legal fees and caution deposits can cost as much as 50% of the rent.

In most parts of the world, traditional estate agents' fees range from 0.5% to 5%, depending on the value of the transaction and negotiating power of the parties. In the UK for instance, the range is 0.75% to 3% according to MoveWise, a UK-based real estate advisor. In the US, the commission is usually between 4% to 6%. Across most African cities, the percentage is higher and can range between 5% and 10%. We have found that for residential rentals especially of less than 10m value, most agents usually insist on a 10% agency commission. In some locations around Lagos, they can go as high as 20% for rental properties of less than a million. In addition to this, a 10% legal fee is usually mandatory, and some landlords can charge as high as 20% extra as a caution deposit. The impact of this is that it shoots up the total amount that prospective tenants end up paying for new leases, and has been a major discouraging factor for most prospects.


The additional hassle of moving and settling in can be very daunting in busy Lagos

Relocation costs can make things worse, but outside the financial cost, the hassle that comes with it wears out quite a number of people. Based on a sample relocation cost quote we got from Packmyload and a number of other Nigerian-based logistics companies, it costs a minimum of 150,000 to move furnishing items in a 2-bedroom apartment in Ikeja to Lekki Phase 1. Judging from the average rental price data that we are currently tracking Lekki Phase 1, this means that a prospective renter will need to pay between 5% and 10% of the rent on logistics.


Closing thoughts.

When considered individually, these costs may be insignificant but can sum up to almost the same amount that a prospective tenant is paying as rent, or even more. What has been your experience with renting a new apartment in Lagos? Share with us by sending a DM or commenting on our social media handles. 


If you are looking to rent or buy an apartment or get a shortlet, go to BuyLetLive.com and find properties that meet your requirements. If you are an agent, developer or landlord, visit the signup page on BuyLetLive.com to create an account and advertise your properties.