The first quarter of this year was an exciting period for investors in and developers of apartments for rent, as home seekers who came to the housing market looking for accommodation favoured that house-type.
Of the 100 percent total demand in the market within this period, only four percent of buyers were looking for apartments for sale; five percent land for sale; 14 percent houses for sale; 19 percent houses for rent, and as high as 58 percent of the home seekers were in the market looking for apartments for rent.
Conversely, investors/developers favour houses for sale and this was reflected in the total supply of housing within the first quarter of the year, which shows that whereas 14 percent of the houses put on the market were for rent; 14 percent was land for sale; 9 percent was apartments for sale and 22 percent was apartments for rent, and as high as 41 percent of the houses was for sale.
On the housing demand market, Obi Ejimofo, the CEO of Lamudi Nigeria, an online property market place, explained to BusinessDay that mainly for economic reasons, the rental market has in recent times become much more active than the sales market.
“While over 70 percent of property searches were for rental properties, only 30 percent of properties made available were sales”, he disclosed, emphasising that “despite a reported lull in activity in the amrket, the first quarter of 2015 represented our busiest since launch. Visits to the Lamudi platform were up almost 43 percent in comparison to the previous quarter—Q4 2014”.
Ejimofo noted that in terms of rental property, Yaba had the highest demand pressure on both houses and flats, followed by Lekki, adding that while Ajah had the highest demand on flats to buy and Lekki had the highest demand pressure on houses to buy, Ikoyi came second in demand pressure in both houses and flats.
John Strang, MD of Fine and Country, West Africa, explained to BusinessDay on the sideline of an investors forum in Lagos, that demand for apartments was on the increase for both sales and rentals because most families were downsizing.
“Families are downsizing for various reasons. While some prefer apartments to stand-alone four-bedroom or five-bedroom detached houses because they are cheaper to buy and also to maintain, others are doing so because their children are out for school or are already on their own”, he said.
Strang advised that investors should go for apartments, explaining that return on investment (ROI) moved in inverse proportion, such that it dropped as the size of the property increased, say from three-bedroom to four-bedroom apartment, and from four-bedroom to five-bedroom detached houses.
In a highbrow location such as Lekki, a three-bedroom apartment which sells for N72 million and rents for M3.8 million, gives 5.27 percent ROI, while a four-bedroom detached house that sells for N135 million and rents for N5 million, makes 3.70% return on investment.
Similarly, in Victoria Island, whereas a four-bedroom apartment sells for N150 million, rents for N6.5 million with 4.33 percent ROI, a four-bedroom detached house which sells for N450 million and rents for N8 million, gives only 2.22% return on investment.
Adekunle Oyinloye, MD/CEO of The Infrastructure Bank, confirmed at an investment forum hosted by Lekki Gardens recently, that the Nigerian rental market was very active, estimating that 80 percent of Nigerians lived in rented apartments, spending a sizeable proportion of their income on house rent.
Oyinloye added that about 50 percent of Nigerians also lived in substandard houses, pointing out however, that this provided investment opportunities in this market which he said had “massive untapped potential”.
CHUKA UROKO
