Luxury real estate: Imported finishing materials pushing up rents, values

As Nigerians search for affordable housing units, the use of imported finishing building materials are pushing up rents and values in some quarters. DAYO AYEYEMI, reports.

Crave for imported finishing building materials by Nigerians is already pushing up rents and values of luxury affordable housing in the property market.

Imported finishing materials in this category include floor and wall tiles, roofing sheet, aluminum, steel, glass, faucets, bath-tub, locks, security doors and curtains, among others.

As at present, prices of locally sourced materials such as cement, sharp sand, sandcrete blocks and filling sand have also climb.

It was gathered  that high price tags on imported building materials have led to increase in rental values of  one bed bedroom, two bedroom and three-bedroom apartments, including duplexes in the  medium-income neighborhoods of Lagos, Abuja and Port Harcourt.

Unlike two years ago, survey by the Nigerian Tribune has shown that prices of imported building materials such as floor and wall tiles have increased by 100 per cent and 120 per cent respectively.

For example, one pack of vitrified floor tiles, which cost N2,200 in  Lagos’ building material market in 2019/2020, is currently selling between N4,500 and N5,000 per pack, while a  pack of Spanish/Italian tiles has soared to N6,000 – N7,000 from initial N3,200.

Also, prices of reinforcement bars also jumped between N330, 000 and N370,000 in 2021 from N260,000 in 2020.  Prices of imported roofing sheet and ceiling tiles moved to N3,500 per square metre (psqm).  Prices of plywood per sheet now cost between N10,000 and N12,500 , depending on location.

Rent values

In Ikoyi and Victoria Island for example, rents for three and four bedrooms cost between N17million and N5.5 million due to high taste for imported finishing materials and luxury real estate in these enclaves.

Nigerian Tribune’s market survey further revealed that prices of property in Lekki –Epe corridor have kept increasing in values as they are welcoming more developments such as Dangote petro-chemical industries, Lekki Deep Sea port and other new developments in the location.

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Despite the high rental values, the managing Director, Financial Derivatives Company, Mr Bismark Rewane, in his latest report of the sector, noted that there has been sharp increase in luxury real estate developments on Lagos mainland and island, sighting Marriot Hotel in Ikeja GRA.

On the latest interest in luxury real estate investments, he pointed out that most developers were cashing in on long sub-leases, while agents/owners are also targeting high brow areas

According to him, hotels have been offering promotional packages for events, while room, board, mini lounges, exotic restaurants and fine dining are being cannibalised by Airbnb.

However, he noted that high unemployment and income squeeze have been affecting aggregate demand for luxury real estate.

Sector’s update

Rewane stated that real estate sector expanded by 3.85 per cent in second quarter (Q2) 2021 from 1.77 per cent in Q1 2021.

Recalling that the sector experienced the sharpest contraction of -21.99 per cent in Q2 2020, the renowned economist pointed out that the latest improvement in activities in 2021 was partly driven by increased investments as interest rates declined

According to him, vacancy factor down is expected to reduce to 20 per cent in Q3 2021 from 25 per cent in Q2.

Survey & Trend

On survey and trends in the real estate sector in the third quarter Q3 2021, analysts from Rewane-led FDC, said that Ikoyi’s vacancy factor index increased to 33 per cent from 32 per cent in Q2 2021.

Due to high rents for big corporate buildings, the noted that some rents were priced in dollars, adding that virtual work also reduced demand for office spaces

In Victoria Island, they explained that the vacancy factor index declined to 19 per cent from 27 per cent  in the second quarter (Q2) 2021.

This trend, analysts said was driven by rising demand for residential housing units and new shared office spaces springing up

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They noted multiple uses of buildings as residential and commercial.

In Lekki, the report stated that vacancy factor index fell to 13 per cent from 21 per cent in Q2 2021, due to an increase in demand for commercial real estate, and increased supply of short lets and serviced apartments

The analysts attributed high inflation and rising cost of building materials to increasing rents in Lagos, adding that the recent housing trend in  the metropolis seemed to be crowding out self-contained due to high default rates among low-income earners.

“New buildings are mostly two and three bedrooms, serviced & shared apartments and duplexes,” the analysts said, adding that serviced & shared apartments are mostly on the island.

Despite the economy, they stated that investors are still delving into commercial real estate on the island, adding that new trend of short-lets & Airbnb is leading to shortage of residential real estate

New trend of short-lets, they expressed that it could also be a threat to hotels.

The analysts stated that an efficient rail system would help to decongest traffic and possibly shift real estate demand to neighboring states like Ogun and Oyo States.

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