No doubt, Lagos is the commercial hub of Nigeria and this is the reason its real estate sector has been an issue discussed in several fora, both home and abroad.
The number of housing units available in Lagos is not sufficient for the population. According to the Pison Housing Group’s 2019 report, the housing stock in Lagos is estimated to be 1.492 million units, while the United Nations put its population at 18 million people in 2019.
Meanwhile, a question or concern of some operators and stakeholders is whether the prices placed on the properties are fundamentally driven or based on assumptions.
Below are the reasons/forces behind the prices, according to a report from Estate Intel:
Owners target highest bidders
With over 3.8 million households in Lagos, up to 2.1 million households are without formal housing. This presents a supply gap of over 55%. As typical in every market, excess demand drives up prices. Estate Intel stated that this makes landlords, who frequently get requests for their available spaces, to increase the prices and let out or sell the property to the highest bidder.
Lack of transparency between asking and achievable prices
Estate Intel added that the multiple agents and developers typically list properties significantly higher than what they are prepared to achieve.
It stated, “We expect developers or agents to aim to achieve the highest possible price, with a window for negotiation, leaving a wider than usual spread between asking and achievable prices.
“A large spread in between asking and achievable rent makes average market rent seem artificially high and encourages other developers to hold fast on those artificially listed prices, keeping average rents or sale prices high.
“This is very misleading especially because most of the properties on the listed platforms in Nigeria are priced well above what is achievable.”
Construction cost and land price
The real estate operator explained that the high cost of acquiring land, including the actual cost of building, also adds to the reasons property prices in Lagos are high.
“We analyzed four brand new projects in Banana Island, Ilasan, Yaba, and Surulere. With sale prices ranging between 21m to 24m for the 2-bed apartment in Yaba and 620m for a 6-bed house in Ikoyi, all developers maintained profits ranging between 15% and 36% and rental yields of 2% to 7%.
“Our analysis shows that land acquisition and construction costs contributed 22% and 64% to the total cost of development respectively, for the Ikoyi project, however, the split was 53% and 47% respectively.
“The skew is due to the fact that Ilasan, Yaba, and Surulere (with an average land price of ₦78,000 per sqm) are relatively cheaper than the more pronounced Ikoyi (Banana Island where the developer bought the land at ₦400,000 per sqm),” it added.
According to the real estate firm, land is a scarce commodity and locations that are close to commercial and recreational activities such as Lekki, etc create demand and push up prices. However, these price increases are not always rational.
It stated, “Availability of a large expanse of land in prime locations such as Ikoyi (especially Banana Island), Victoria Island, and Lekki Phase 1 is limited. As a result, the few landowners are increasing their prices to record levels, even in the face of high vacancies in some properties.”
The Lagos State Government has warned land grabbers against the fraudulent sales of government land, as it steps up efforts to address the menace in the State.
This was disclosed by the Lands Bureau in a statement shared via Twitter on Wednesday.
The Permanent Secretary, Lands Bureau, Mr. Bode Agoro stated that the State was addressing incidents of defrauding unsuspecting members of the public by land grabbers, known as ‘Omonile’.
He urged members of the Real Estate Developers Association of Nigeria, community leaders, land surveyors and other key players in the sector to see the land-grabber menace as a common enemy to the growth of the Real Estate sector and efficient land resources management in Lagos.
He said, “These Land Grabbers have now taken their game to a new level as they have the audacity to erect signposts bearing Lagos State Government logo and excision application file numbers in their desperate attempt to deceive the prospective buyers.
“This engagement is, therefore, crucial at this material time as we cannot afford to fold our arms while some dubious persons continue to take advantage of hardworking and responsible Lagosians by selling illegal lands to them.”
According to him, if the Omonile syndrome was not nipped in the bud, it would fester and continue to prevent many well-meaning corporate organisations from making investment decisions due to the confusion, anarchy and avoidable conflicts caused by land grabbers’ activities.
What they are saying
Chairman, Real Estate Development Association of Nigeria (Lagos State Chapter), Mr. Bamidele Onalaja, explained that members of the Association were fully committed to working with the government to confront the challenge posed by land grabbers’ activities in the State.
The Co-Ordinator of the Lagos State Special Taskforce on Lands Grabbers, Mr. Owolabi Arole, noted that the Lagos State Properties Protection Law 2016, established a task force to enforce the provisions of the law and vested in it, power to arrest offenders.
What you should know
- Some of the communities where activities of land grabbers are most notorious in Lagos State are Okenla Village, Idake Village, Ajao Oki Village, Ladegbole Village, Imedu Village, Iratirin Village, Obadimisi Village, Shekina Alo Village, Fowoseje Village, Iraboko Village. Adamatiye Community, Ogunro Community and Sorogun Community – all in Ibeju-Lekki, as well as Ogombo Village in Eti-Osa and Oshiun Village in Kosofe, Lagos State.
According to him, the extension has narrowed the creek and brought about distortion in the aesthetics of the shoreline as well as a high possibility of environmental degradation.
The Commissioner stated that perpetrators of the illegal reclamation into the Lagoon violate the Physical Planning laws of the State, adding that they had been served with ‘Stop Work’ orders but persisted in the reclamation and construction.
He said, “State Government will not fold its arms and watch the degradation of its environment and attendant risk to life and property of the citizenry.
“The demolition, as well as dredging and channelisation works on the illegally reclaimed lands, will continue at Banana Island and other shoreline areas of Lagos in order to restore sanity.”
What you should know
- The State Government commenced the demolition of buildings that contravened the building laws and regulations in Banana Island on Monday.
- At 102 Close, K Zone, a section of the lagoon has been reclaimed with just the provision of narrow drainage for water to flow. As a result, the concrete and perimeter fence erected facing the lagoon were pulled down, while the building was sealed and the gate locked.
- At 306 Close, a two-storey building under construction was pulled down for not getting an approval to build, as the development encroached on the state shoreline.
- It would also be recalled that the Lagos State Government had sealed off 22 buildings in the Banana Island and Ikoyi axis of the state over lack of building permits and conformity issues.
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