In clear departure to what has long been the norm, residents of highrise luxury apartments in Ikoyi can actually renegotiate their rents downwards if they set their minds to it as rents crash off their marks. Bennett Oghifo writes
As this year’s property market cruises to a close, there are signs that the rental price of high-end apartments in Ikoyi and Victoria Island may not move anywhere but down. Occupants of most of these dollar-denominated luxury apartments are moving out either on the prompting of poachers marketing newer apartments or for other equally pressing reasons. “Some have bought houses outside while others have moved out of town since things are now quiet in the Niger Delta,” said, a real estate consultant, Emmanuel Bankki, who operates in that segment of Lagos’ property market.
Some analysts say the rental market in Ikoyi and Victoria Island, both highbrow communities is losing steam and that rents are down to about their half way mark and tumbling.
But the President of the Nigerian Institution of Estate Surveyors and Valuers, Emeka Eleh said the rent reduction is not as drastic as presented. “Demand is low and the rent is adjusting to it. To say the market is tumbling or has reached 50 percent rent reduction may be an over-statement. It is not that much but we can put it at about 25 percent.”
There is no likelihood that things would change for the better on the side of property owners in the near future because as Eleh said, “the economy is down and the expatriates, who are among those that usually rent luxury apartments in Ikoyi are not coming in because of the dull business environment. If the business environment improves then the market will improve. Once the macro economy picks up, the housing sector will also pick up. The people who occupy these houses, mostly expatriates and chief executives of companies, are not coming in because the companies are not doing well.”
An estate consultant in Ikeja, Peter Omokunbi, said rents, especially in the elite segment, plummeted appreciably since last year but not many tenants were aware of this because they either did not check with neighbours or agents. “If you expect your agent or landlord to tell you about the drop and their fears for the market, then you’ll be disappointed.”
The glut in the nation’s property market is not only fueled by over supply brought on by the inability of developers to sell or from dumping by investors indebted to banks, but also by the large droves of owner-occupier developments that arose from the need to stop paying exorbitant rent to landlords.
Another trigger for plummeting rental prices is the drop in the personal incomes of high-earners and rising unemployment rate as the economic downturn shows no signs of abating. As such hitherto high flyers are being forced to relocate to more modest apartments or to their own homes in whatever location, if they were lucky to own homes prior to the meltdown.
Unlike the Ikoyi and Victoria Island markets, the Abuja property market, experts say, is still enjoying high rental rates nonetheless because of the influx of expatriates and Nigerians looking for greener pastures. “The high-end areas of Asokoro, Maitama, and parts of Wuse, still attract high rent, but have many vacant buildings because of high prices. Whoever ventures into that segment of the market must be sure of his or her finances,” volunteered Obiora Okoronkwo, a real estate consultant in the Federal Capital.
“Rent is more affordable in the suburbs and the landlords charge reasonably and don’t ask for long period rents as it is done in Lagos. Even in Port Harcourt, my colleagues tell me landlords are beginning to ask for a year’s rent because of extended periods of vacancies,” Okonkwo revealed.
Good for buyers
Rent charged for apartments and for other residential, particularly for high-end types are nose-diving and this rare occurrence has been ascribed to a combination of factors. According to a real estate consultant, Mr. Osita Okoli, Principal Partner Osita Okoli & Co, the crash in rent is due to “the cash squeeze occasioned by the recent stock market crash and the banking sector crisis, in addition to a cooling off of the pressure caused by the mass exodus of expatriates and senior staff from the Niger Delta.”
Okoli, who was former first vice president of the Nigerian Institution of Estate Surveyors and Valuers, explained that this led to an acute drop in demand for luxury accommodation “while supply remained on the increased in Lagos, especially. The result is that rent has been plummeting in Ikoyi, Victoria Island and Lekki by as much as 25 percent, even without definite statistics.”
In the emerging matrix, he believes tenants cannot ask for rent adjustments mid-term into their leasehold unless it was so stated in the lease agreement but that at the expiration of the lease if rental prices are still in decline, then a tenant could convince his or her landlord to accept a downward review in consonance with what prevails. “Rent is normally fixed for the duration of the lease and as such reviewed upon expiration unless there is a special provision.”
The margin of rental price drop could be wider if statistics were available to measure it, says Akin Olawore, a Fellow of the Nigerian Institution of Estate Surveyors and Valuers. “Unfortunately, there are no statistics to confirm this but perhaps we can say there has been a 30-50 percent drop in rental prices for luxury apartments and homes.”
Olawore, who is president of African Real Estate Society, believes the noticeable drop in rental prices is in response to the economic mood of the nation. “It is the times we are in. The high-end real estate market is patronized by multinational companies, oil and gas operators, banks, telecom companies and other companies with expatriate personnel on their payroll. This market has thinned out in relation to supply hence a tumble in rent, which was superficial ab initio. An adjustment is now taking place and areas like Ikoyi and Banana Island are affected.”
The drop, which became noticeable late last year when people started relocating to avoid renewing rents, left many housing units looking for new tenants commanding lower-than-usual prices. Rates are being cut to fill the growing vacancies, explains Thomas Akintunde, a facility manager in a Lagos Government owned high-rise building in Victoria Island . He believes that although this time of the year is usually the slow season for the property market, the occupancy rates are lower than normal. “We use market surveys to adjust rent rates at a competitive local level, especially with all these heavy duty buildings all around us and the thinning of our usual tenant groups. We have seen rent drop quite a bit, but we understand the decrease is a casualty of the economic meltdown that we are experiencing.”
He agrees that plummeting rent rates may mean that most people can now rent affordably, particularly those wishing to live in luxury apartments, and who have been priced out of the market. Another reason he gave for the drop in rent is the prevalence of job cuts by blue chip companies and a reduction in the number of expatriates from the Niger Delta most of whom have returned to the region. “For those who lost their jobs, especially in the banks, it is getting so tough to find a decent paying job and you really have to make sure that your money goes as far as it can.”
In the middle to lower ends of the nation’s real estate market, old rental prices are still being charged on most sitting tenants, because “landlords realise there is an economic crunch that is biting everybody and unlike before more people are relocating from the city centre like Ikeja, Yaba, Surulere, Ilupeju and Anthony to areas like Mowe/Ibafo or Lekki/Ajah to more modest apartments or to their own property,” says Peter Ajumobi, a real estate consultant.
Ajumobi contends that he has seen more vacant houses between October last year and now than he has seen in the last three years, especially in Ikeja and its environs and advised sitting tenants whose landlords propose rent increases to look in the neighbourhood and may be surprised to find even better accommodation for lesser price. “One of my clients moved into a relatively new house in December for a hundred thousand naira less than was charged him by his former landlord, who jerked up his rent by N150,000. He didn’t understand the reason for the increase and so decided to look for another apartment, hoping that by the time this one runs out he would move into his personal building in Mowe.”