By Yinka Kolawole

Unfavourable market dynamics have forced property developers at the upper segment of the housing market to embark on price reduction, a development which analysts have attributed to waning demand and falling prices.

The rental market at the highbrow areas of Lagos has witnessed considerable rents drop which is a direct fallout of the global economic crisis that has caused serious credit squeeze and also reduced people’s purchasing power.

Investigations reveal that some developers have made substantial reductions, ranging between 10 and 50 percent, in their asking prices. Even this seems not to be stimulating enough demand, in most cases. “This simply means price tags on these properties were unrealistic in the first instance,” says an analyst. Places like Lekki, Ikoyi and Victoria Island have seen 10-15 percent drop in rents. These are areas where a tenant was once required to put three-year rent down before he could secure a decent accommodation. Now, people are paying one-year rent because there are many units waiting to be taken up. “We are getting to a point where people are going to pay even six months which is what is happening anywhere else in the world,” the vendor stated.

In an apparent response to the credit crisis in the financial system, owners of flats at the 1004 Estate have slashed their rents considerably. A two-bedroom flat at the estate started out in the market at N2.75 million per annum. Now, with N1.7 million per annum, a prospective tenant can get a two-bedroom flat there. Three-bedroom flat came out there for N3.5 million per annum, but now the same three-bedroom flat goes for N2.2 million per annum.

Afribank Estate Company announced a drop in the price of its Eldorado Villas in Magodo GRA to N80 million from N95 million. Omais Homes said it was compelled to review the prices of its houses in the Ikeja GRA and Opebi downwards from N65 million to N55 million and from N45 million to N30 million, respectively.

Cornerstone Mortgages also had to slash the prices of 16 housing units of its Rose Garden Estate in Egbeda to N8.5 million from N10.1 million. This according to its chief executive, Mr. Toyin Banjo, is “in response to our realisation that the prices of properties are increasingly getting out of the reach of the middle class who are our target audience.”

Soe Properties also reduced the prices of its 40-unit Heaven’s Gate Estate in Lekki, A three-bedroom detached bungalow at the estate which hitherto sold for N26 million now goes for N16 million; while a two-bedroom semi-detached bungalow that sold for N20 million now sells for N10 million.

However, in a direct opposite of what obtains at the high end of the property market, where both capital and rental values have come down considerably, rental values have gone up considerably in the mid-income areas. Places such as Surulere, Maryland, Gbagada, Ilupeju, Ikeja, Amuwo Odofin, etc and even more in the low income areas like Orile Iganmu, Abulegba, Iyana-Ipaja, Egbeda, Ikotun, Isolo, etc., prices have seen astronomical increase in the last one year.

A well finished three-bedroom apartment in Maryland now goes for more than N700,000 as against N500,000-N550,000 per annum it went for just a few months ago. Also, because of the massive infrastructure upgrade going on in Surulere, coupled with the influx of big time businesses into the area, you can hardly get a three-bedroom flat there now for N500,000. A well finished three-bedroom flat in Surulere now goes for between N750,000 and N800,000 per annum and may require upfront payment of two to three years.

The situation is not any different at the low income areas. In Orile Iganmu and all places along the Lagos-Badagry axis, owing to the on-going road construction there, house rents have more than doubled in some cases. A two-bedroom flat in Orile, for instance, now goes for between N180,000 and N250,000 as against N120,000-N150,000 about a year ago.

This has had overflowing effect on areas like Ikotun, Egbeda and Isolo which have been receiving displaced tenants from the Orile, Amuwo, Okota and Festac areas, with increase in house rents. A three-bedroom flat in Isolo now goes for about N300,000-N350,000 as against N200,000- N250,000 just a few months ago. This same goes for Ikotun and Egbeda.