There are fears that rents in Lagos and other commercial cities will increase further in the second half of 2021.
This was revealed by experts who spoke with Nairametrics in separate interviews.
Contrary to the initial expectations of some analysts that rents would remain unchanged in 2021 due to the current economic difficulties exacerbated by the covid-19 pandemic, there is reason to believe that the opposite could actually be the case in the second half of the year. year round, especially in the country’s major commercial cities.
What the experts say about increasing rents
According to Paul Bamigbola, president of the Nigerian Institute of Estate Surveyors and Valuers (NIESV), Lagos Chapter, two major issues that will drive real estate rents up are the inability of the market to create a balance between the asking and actual prices of properties and the rising cost of building materials.
In most cases, in Lagos and other commercial cities, the marketing activities of agents and developers increase the costs of renting properties. Indeed, there is a cost associated with the membership of these actors to serve as a link between customers and owners. Additionally, these real estate value chain players are also known to offer properties at significantly higher “asking” prices than what could actually be the rental price set by the owner. The obvious goal is to get a good deal or possibly rent the property to the highest bidder.
These artificially increased real estate prices are not only misleading but also prevalent in the industry.
Also recently, potential tenants have started to be wooed by rent, later paying offers from other players in the property value chain who offer rent installment options to tenants. As good as this initiative may sound, in the long run it adds to the cost of renting as tenants would have to pay interest to compensate for the flexible rent payment option.
Bamigbola also noted that the surge in the cost of building materials is another reason that house prices will rise in the second half of the year. To corroborate this, Nairametrics analyzed four new projects in Banana Island, Ilasan, Yaba and Surulere. Selling prices ranged from 21-24m for the 2-bedroom apartment in Yaba and 620m for a 6-bedroom house in Ikoyi; and all developers maintained profits between 15% and 36% and rental yields between 2% and 7%.
The analysis shows that the land acquisition and construction costs contributed 22% and 64% respectively to the total development cost of the Ikoyi project.
Kayode Oluwo, a land surveyor and real estate developer, told Nairametrics that the benchmark price for iron ore in the international market is expected to exceed $ 200 / tonne by the end of the first half of the year. This alone will further drive up the price in the local market and lead to increased rental costs for tenants.
Oluwo lamented the underdevelopment of iron ore mining in Nigeria, which has led the country to import the product rather than producing it locally.
“The price here, which is around 330,000 N / tonne (8mm), is expected to move north and could increase by 100,000 N or more in the second half of 2021. Growing demand has driven up prices for gasoline. steel from Asia to North America “, he stated.
What you should know
Nairametrics previously reported rising prices for steel as well as prices for other building materials, including cement, which recently rose from around N 2,000 to over N 3,000 per bag.
There are also indications that prices will continue to rise across the board for these building materials in the second half of 2021.