In a very significant way, the success of Eko Atlantic City project in Lagos is impacting on land value within the neighbourhood, especially in Victoria Island where there has been a dip in value estimated at 30 percent by the second half of this year.
Eko Atlantic City, a new city emerging from the reclamation of land from the shores of the Atlantic Ocean in Victoria Island, has so far increased the size of prime land in that area by 5 million square metres on which a number of high-rise luxury residential and commercial buildings are springing up.
Many of the corporate organisations in Lagos are taking position in the new city and this has considerably reduced demand for land in Victoria Island, which is, unarguably, the most vibrant business hub and central business district in Lagos, Nigeria’s thriving commercial city.
While land value appreciated 9 percent in Ikoyi, selling for N328,000 or $1,160 per square metre, up from N300,000 or $1,500 per square metre by the middle of 2016, and Lekki Phase 1 also appreciated 20 percent to N150,000 or $530 per square metre, up from N125,000 or $620 per square metre, VI declined 30 percent to N300,000 or $1,060, down from N430,000 or $2.18 per square metre.
“The economic hitches currently experienced in Nigeria became apparent in 2014, however, land values have continued to rise fairly steadily in Ikoyi, Lekki Phase 1, and Ikeja GRA between 2014 to 2016. Land in Victoria Island, on the other hand, have taken a major hit with 30 percent decline between 2015 and 2016. This may not be unrelated with the significant supply made available just across the road by Eko Atlantic City,” Tayo Odunsi, director, Real Estate Advisory at Northcourt Estate, says.
Odunsi notes that as the success of the project becomes more apparent, it is reasonable that land bankers may prefer a better constructed and managed location, especially with the testimonial of Banana Island, which was successfully developed by the same promoter.
The impact of hash macro-economic environment in Nigeria generally was not lost on the property market within the period under review, and it can therefore be said that what swept away any capital appreciation a land owner may have earned is the foreign exchange factor.
Foreign exchange remains a critical factor in Nigeria today as business activities have almost been eroded by lack of, or restricted access to the dollar which today exchanges over N400 to a dollar.
Odunsi reveals that, across all locations, land lost up to 55 percent of its value, and a minimum of 28 percent between H1 2015 and H1 2016, if considered in dollar terms, insisting that “this is a more realistic way of viewing the true value of the asset, assuming it were liquidated to procure other investments, goods or services in the country.”
The residential segment of the market was also impacted and, on the surface, it seems to be clouded by news of forced sales, declining prices and rental defaults, which is true in a lot of locations and scenarios.
“Our housing survey, however, shows a healthy vacancy level in most low and mid-market locations, especially in Lagos and Port Harcourt. It becomes apparent that the high-end locations in any part of the nation are the ones on the receiving end of the economic decline,” Odunsi says.
According to Odunsi, a cursory look at the growth in capital values in Lagos quite generally indicates that price of stand-alone houses appreciate faster than that of flats, pointing to a cultural preference. However, while prices of 3-bed apartments dropped in Lekki Phase 1, Magodo, 1004 Estate and Ikeja GRA, the prices of 4-bed houses grew in these locations.
He notes that the price appreciations seen in this survey does not infer buoyancy of the market, pointing out that market players all chorus the dryness of the sector, reduced sale and lease transactions as well as a reduced development pipeline as fewer developers are still actively constructing new homes.
CHUKA UROKO
