Property market in turmoil as prices collapse

By AYOOLA OLAOLUWA

Nigeria’s property market is witnessing rising stock and upsurge in vacancies of rental accommodations, Business Hallmark findings can reveal.
Investigation revealed that while transactions in the real estate sector have remained sluggish, price of houses are falling each day and many facilities remain unoccupied.
According to a data obtained by BH, real estate agents now have the highest amount of stock since December 2016 when the nation recorded a recession.
However, there is a silver lining from the negative trend. Tenants and buyers are now kings. Unlike in the past where landlords reign supreme, tenants, especially those in high-end neighborhoods, now largely dictate their tenancy agreements.
While the Federal Government says the nation suffers a housing deficit of over 17 million, operators in the real estate sector are recording low sales. In Lagos for instance, unoccupied buildings have become common sight.
Industry experts told BH that the nation’s stagnant economy, which led to the collapse of many firms, as well as loss of jobs and revenue, are daily fueling the surge in the numbers of vacant houses, especially in upscale neighborhood of Ikeja, Surulere, Apapa, Victoria Island, Lekki, Ikoyi and Lagos Island. They lamented that the number of unoccupied spaces has risen sharply over the past three years.
A realtor, Surveyor Seye Ogungbe of Seye Ogungbe and Co., told our correspondent that many properties have been in the sales/rental market for over three years. According to him, these vacancies remain in spite of the reduction in rents charged, as well as selling rates.
The drop in the demand for office and dwelling spaces has forced many homeowners and landlords to lower their prices and rents to outrageous amounts.
For instance, a businessman in Lagos who runs his business from a rented office apartment in Apapa, narrated to our how he got a good bargain from his landlord who had earlier tried to evict him.
“I was given a quit notice by my landlord to leave his property for delaying in paying my rent. As I was preparing to leave, the owner asked me not to bother again, but I refused. After a lot of persuasion, I told him I won’t be able to pay the N10million rent I used to pay.
“He then asked me how much I could afford. I told him N2.5million. I was shocked when he agreed to the new rent. Many buildings in Apapa are presently unoccupied. The landlord must have reasoned that N2.5m is still a good bargain rather than having a vacant and useless property in his hands”, said the tenant who did not want his identity disclosed.
The case of Apapa is worsened by the high number of trailers, tankers and trucks coming to evacuate goods and petroleum products at the ports, thereby making it very difficult to do business. The situation has led to business owners and residents in Apapa relocating to other parts of the city with easy access, leaving behind empty commercial premises and homes.
The same situation applies in several highbrow areas in Lagos. Rather than the owners, it is now tenants that now decide what they pay.
A real estate expert, Architect Ogwola Inalegwu Dominic, attributed the development to the nation’s economic situation, which has inevitably hit the real estate sector severely.
“The reality of the effect of the downturn of the economy on the real estate is that the sector is running at a very slow pace now. Real estate covers other sectors of the economy such as offices for businesses, dwellings for families and warehousing.
“A critical look will suggest to you that all these areas I mentioned are not doing well because the real estate sector is down. The middle and low-income earners, who feed mostly on construction companies, are suffering. It is a multiplier effect. Even the multinationals in the sector are retrenching workers.
“Investors are also afraid, as nobody wants to put his money in a place he is not sure of. I have properties to sell for the past six months, but nobody is pricing them”, he said.
A tenant who recently moved from Surulere to Ijaiye-Ojokoro, Mr. Dapo Adenuga, shared his experience with BH.
According to him, his landlord gave him a letter in January 2020 increasing the rent on his 3-bedroom flat from N500,000 to N800,000 from August.
“I begged him to reduce the rent to N600,000, but he refused. Unable to source for the new rent, I decided to look for another apartment.
“After about three months search, I got a very good apartment at Ijaiye-Ojokoro-Ojokoro at the rate of N350,000. The total package got to N530,000. This is still a fry cry to the N800,000 demanded by the landlord.
“Realising that I was not willing to pay the new rent, the landlord approached me towards the end of my tenancy in July, asking me to pay the old rent but to be prepared to pay N650,000 from August.
“By this time, I had already paid for the new apartment and told the landlord that I will be moving at the end of July. He was so shocked when I told him this because I was a good tenant.
“My sources in the neighborhood told me that the apartment is still vacant, almost five months after we had vacated the property”, Adenuga stated.
BH findings also revealed that prices of properties are crashing because of the volume of properties in the market. More landlords, it was garthered, are putting up their properties for sale, further disrupting the supply and demand chain.
In February this year, a plot of land in the Ijaiye-Ojokoro area was offered to our correspondent for N20million. However, the agent in charge of the land called recently that the land is now available for N13million, a reduction of N7million.
On the street where the land is situated, another four have been put in the market. When our correspondent sought the views of the landlords on why they were putting up their properties for sale, he was told that they planned to relocate to their hometowns as it is becoming more and more difficult to survive in Lagos.
“The situation of things have become difficult for me to bear in Lagos. My tenants are no longer finding it easy to pay for the N5000 a month I charge on a room.
“I have ten rooms in this building. While I personally use two with my children, I rent out the rest. I collect N60,000 a year on each room, making it N480,000 on the remaining eight in a year. This is what I survive on, as well as my monthly pension of N28,000.
“However, things are tough for my tenants. To help them, I suggested that those who don’t have the money in bulk should start paying monthly. In spite of that, many of them are owing me over six months rent.
“The situation is worsened by the increment in the fees charged by the Lagos State government as land use charge. Before now, I was paying N22,270. But now, I pay N48,786.
“Furtunately, I built a small house in my hometown, Abeokuta. I plan to move there after selling my house in Lagos. Since I no longer train children, I should be able to survive on my monthly pension and the proceeds of the house”, said Pa. Samuel Odetola, a retired civil servant.
A former President of the Nigerian Institute of Quantity Survey (NIQS), Mr. Akin Olawore, said the real estate sector in usually the first hit during economic downturn.
“This is because people don’t have money to pay their rent, or go into new leases. Breaking it down, you will discover that in the commercial sector, a lot of commercial buildings that have just come into the market are lying idle because foreign investors that are the primary targets of such properties are not coming.
“A number of them are idle and few people are leasing. That shows that the void is increasing, though it has been like that in the last three years, because of the volume of spaces that are being dumped in the market.
“You’ll find some of them reducing their space and rent. So, it is really affecting real estate business. On the other side, people are defaulting. They just can’t find the money to pay now, so the default rate has also gone up.
“The market is of demand and supply, and purely a business decision. So, when you need money and this is what you have, then you have to look at what the market can offer at that point, it is not as if you are selling. And even if you are selling, you also consider what you will use the money to do.
“Unfortunately, I don’t think the fault is from the current government, I think it is a cumulative issue. The country is just coming to grips with some of the challenges and bad decisions we created for ourselves. We all need to come together, take what is available and create a running market around every house. Having vacant houses lying everywhere is not helping the economy.
“For instance, it is when I give you money to buy and you in turn buy from somebody else that money starts to go round to make more money. Nigerians need to start adjusting to make our economy bounce back. We don’t have foreign exchange now, and we have been depending so much on that”, Olawore said.
A real estate professional based in Ikeja, Mr. Jacobs Kalejaiye, said “Owing to the downturn in the nation’s economy, several cities, especially Lagos, have been badly hit. While many prime properties are wasting away unoccupied, the much-needed capital to turnaround the fate of the sector has taken flight. As it is, we now practically beg would-be tenants to pay what they can afford just to fill up spaces in other to pay up bank loans and sundry charges”, lamented.
A surveyor, Mr. Kolawole Ayoola, said this is the best period for tenants to secure good bargains and buyers to bid for property, stressing that many property owners are now disposing their asset at lower prices.
While blaming the lull on the nation’s sluggish economy, he said depreciation of the naira had a hand in the real estate crisis.
“I believe now is the period to buy property if the price and location is right because a lot of property owners are disposing some property to offset debts, execute projects and have ready liquid cash”, Ayoola said.