Category: Business

What could be the cause of the lingering property glut that hit Ikoyi, Victoria Island and Lekki few years ago? There are exotic houses everywhere in these areas but many remain unoccupied, years after their completion. Are they overpriced or what? Okwy Iroegbu-Chikezie asks.

Ikoyi, Victoria Island and Lekki in Lagos State are the toast of the rich and famous. Over the years, they have remained the choice areas for expatriates and the rich to live and play. Yes, the rich wish to live in these areas but most properties there now carry the “to-let” or “for sale” tag. And the tag has been on them for months or years.

The properties are exquisitely and tastefully finished with top-of-the range infrastructure and services yet, they have not attracted tenants. Usually, the properties come with well-cut lawns, fitted kitchens, fitted bedrooms, gym, lawn tennis court, table tennis, 24-hour electricity, and bar, among others. The flats, detached duplexes and town  houses do not come cheap. For instance,  a three-bedroom  luxury serviced apartment on Banana Island costs $60,000 per annum; a detached duplex goes for $75,000 per annum, a five-bedroom, with a single room boy’s quarter  in  Victoria Garden City (VGC) goes for N70 million. On Victoria Island, such luxury flats go for  between $40,000 and $50,000 per annum.

Although developers have improved on services and provided top-of-the-range facilities to woo tenants, there have not made impression on tenants. Government also considers these areas with the provision of competitive infrastructure, such as high quality roads exemplified by the soon-to-be commissioned Lekki/Ikoyi bridge, mini-water works, and recreational services, among others.

In an interview with The Nation, former National Publicity Secretary of the Nigerian Institute  of  Estate Surveyors & Valuers (NIESV) Mr Sam Ukpong said the glut is an interplay of demand and supply. He said many houses have been supplied to the market without effective demand. He said when the Federal Government sold its properties some years ago, in Ikoyi, most of them had large expanses of  land with single occupants, which its new buyers converted to storey buildings for multiple prospective tenants.

He said: “ The challenge here is the demand for the properties is not as high as supply – leading to a glut. Besides, the disposal incomes of people  and even companies have shrunk to unimaginable levels.  The developers of these houses, most times, lack construction knowledge or trends in housing development and build what will not easily be taken up by tenants.”

Ukpong cited an example of people building houses that cost $60,000 per annum. He wondered how a young graduate would be able to rent such an apartment.

He said what some people are doing now is to sustain their daily living on an average income and not necessarily live above their means.

The former NIESV spokesperson also said some developers build wrongly by either not having a kitchen or sitting room big enough for tenants’  needs. So, although people inspect such buildings but they are not usually satisfied with them.

The Chairman, Nigeria Institute of Estate Surveyors & Valuers (NIESV) Lagos branch, Mr. Shola Fatoki, said the  property glut is a mirror of the downturn in the economy.

This, he said, could be seen in the movement of some residents from the upscale areas to places such as Gbagada and Ilupeju while the former residents of those middle class abode have since relocated to Ogba, Agege and Mowe/Ibafo in Ogun State. He called on President Goodluck Jonathan and his economic team to move fast in tackling the problems of the economy.

He stressed that except the government tackled issues relating to  land acquisition, mortgage, land speculators, family land holding, funding and cost of labour, Nigerians would always find it difficult to rent available  houses  due to paucity of funds and,  by extension,  would find it difficult to  own their own houses.  Fatoki said the high cost of construction and the lack of patronage of local building materials are some of the reasons some houses upscale properties have been without tenants. He said as far as incomes do not improve, there would always be houses without tenants.

Fatoki criticised the high cost of acquiring titles in Lagos and Ogun states, noting that it is prohibitive and a limiting factor to home ownership.

But Lagos State Commissioner for Physical Planning & Urban Development, Mr. Toyin Ayinde, insists that land acquisition and building approval processes had been liberalised, with the creation of agencies, such as the Building Control Agency, and the strengthening of town planning authorities up to the local government level. He said the government was gradually eliminating bottleneck in the approval process to attract developers .

A developer, Mr Kenny Ojomo, on the Lekki-Ajah axis, confirmed the high vacancy rate in the area. He said it was more visible in Lekki  where a great percentage of houses carry the “to–let” toga with banners and boards. He said some properties are over-prised by their owners – making it impossible for them to be sold or let out quickly. He said it was more worrisome where houses which don’t have competitive facilities or services are prized so high.

Ojomo urged developers  to be realistic and also work in tandem with current economic realities to beat the property glut. He also highlighted the fact that some developers do not follow trends in real estate market while building houses.