Prices continue to soar, off-plan sub markets gain momentum, increase in off marketing listings, the shortlet bubble and the millennials rule characterised the Lagos Island residential real estate market in H1 2021.
Considered the most expensive real estate market in Nigeria and by extension, West Africa, Ikoyi, Victoria Island and Lekki Peninsula neighbourhoods continue to thrive as a prime property market.
Despite a struggling economy and general uncertainties surrounding the country at large, overall market activities in various residential sub-asset classes remained strong in the first half of the year. Residential real estate prices in these neighbourhoods are hovering near an all-time high and developments are springing up at an unprecedented rate.
This article looks at various activities and trends that shaped the real estate market in these neighbourhoods in H1 2021.
The Lagos prime land market continued to witness an upsurge in activities with land prices at an all-time high in prime locations on the island. Gated communities like Banana Island, Shoreline Estate, Cowrie Creek, and Pinnock Beach Estate witnessed well over 50% increase in prices YoY ( H1 2020 to H1 2021).
Asking land price in Banana island currently averages 850,000 – 1 million per Sqm and can go as high as 1.2 million per Sqm for Waterfront lands.
Land prices continue to go up due to pent up demand for an asset class that is generally limited in supply coupled with the fact that most landowners are currently willing to hold in anticipation for a greater return on investment in years to come.
Another major reason is the dollar induced effect on the economy which has generally affected the pricing of all goods and services in the economy.
Off-plan activities continue to gain momentum in the market, thriving mainly because it provides a win-win situation for both the developer and home buyers. Developers on the island are increasingly leveraging off-plan transactions to finance their projects while home buyers get to a buy at a relatively lower price point, flexible payment plan and the option to choose their own fittings and fixtures for the house.
Off-plan transactions represented a substantial volume of total sales transactions recorded in these neighbourhoods.
Millennials continue to rule
As expected, millennials continue to play an active and more dominant role in the market. They were the major participants in starter homes and low entry properties market with a price range from N25 million to N80 million. The market also witnessed high demand for studio and 2 bedroom apartments across neighbourhoods with top location requests in Lekki Phase 1, Oniru and Ikate.
The short-let market in these neighbourhoods continues to thrive, with a lot of activities happening in Ikoyi, Victoria Island and Lekki Phase 1. The market has been characterized by heavy competition as H1 2021 witnessed an array of both private and corporate institutions entering the submarket.
Apartments are gradually being converted to executive leasing with demand for corporate luxury residences on the rise. These apartments afford the users the ability to rent on their terms and the flexibility to change apartments and neighbourhoods. They are essentially set up for convenience and productivity.
Sample tracked apartments that are well-furnished recorded over 85% occupancy rate in H1 2021. Apartment room sizes of 2 and 3 bedrooms were predominantly sought after.
The prices for a typical 3-bedroom apartment starts at N120,000 (about $230) per night while a detached house goes for about N240,000 (about $500) depending on the neighbourhood.
H1 2021 also witnessed a significant increase in the number of off-market listings. These are listings that are offered for sale or rent privately. More sellers in a bid for privacy opted for off-market models for selling their properties.
Negotiations continue to play a significant role in deal structuring and closing in Lagos prime residential markets. Gaps between the actual listed prices and the closing price continue to widen. Averagely, properties sold between 15-20% lower than their listed prices.
H2 2021 looks decently promising as some real estate developments currently in the works will be delivered. Most house lease renewals are done during this half of the year.
Holistically and comparative to previous years, the market in 2021 is on course for a good run.
Ogunkunle Olabode is a real estate analyst at CW Real Estate Lagos, a high-end advisory and marketing firm, He’s a graduate member of the Nigerian Institute of Estate Surveyors and Valuers ( NIESV).