Demand for budget-friendly homes surges amid layoffs, pay cuts
As the Nigerian economy falters due to the ongoing coronavirus outbreak, businesses are worst off, prompting pay cuts in many companies, search by people living in rented houses for budget-friendly homes across cities and towns to reduce costs.
The Guardian learnt that the current situation has taken a toll on the employees of private firms with massive layoffs and downsizing. Some economists predict an even grimmer picture: millions of jobs, across sectors, are on the line.
It has been observed that some Nigerian families living in rented flats and houses in cities are now shifting to smaller apartments so as to manage expenses after the Covid-19 pandemic stalled economic activity at an unprecedented scale.
Essentially, those whose yearly rents are due have begun re-negotiating the rent with their landlords to cut the rents, while others are making plans to relocate to cheaper accommodation when their rents expires.
For instance, Mr. Kunle Ashiru, a 41-year-old resident of Surulere, Lagos, is among the many who are trapped in this reality. He was laid off from his full-time job as an accountant at a manufacturing company. He was told the company may hire him back when the economy picks up again.
Unluckily for Ashiru, his rent expires next month; he was paying rent of N700, 000 per year for a three bedroom flat. He plans to relocate to an area that attracts N400, 000 rent and narrowed his search to places like Oshodi, Isolo and Iyana Ipaja.
Many like Ashiru, businessmen and salaried executives, who want to avoid unsavoury encounter with their landlords, have started looking for smaller homes. They say that with income reduced, they want to cut down on expenses. The first thing they seem to want to cut down on is rent.
Estate surveyors and valuers are receiving phone calls of people looking for cheaper flats on rent. They say that in a few months, it may become difficult to find medium income tenants for luxury flats and service apartments in posh areas such as Victoria Island, Ikoyi and Lekki in Lagos as well as choice areas in Abuja and Port Harcourt, if the coronavirus pandemic persists.
“This seems to be imminent as we saw it happen in 2008 and we are expecting it during this impending recession. A tenant paying 15 million rent per annum will perhaps step down to a 10 million rent property,” according to Gbenga Olaniyan, the Principal Partner of Gbenga Olaniyan and Associates and Chairman, Board of Directors of Estate Links Limited.
“This cascades all the way down as someone paying 2 million suddenly realises he can’t afford it and wants to rent a flat of N1 million. We have not experienced this yet but we foresee it. There might be a slight dip in rent as well. It is expected to be slight as we already had a major dip, especially at the high end in 2014. Olaniyan disclosed that his firm has not witnessed any inter area movements but more of intra-area searches where you seek cheaper accommodation in the same location.
In his submission, the Chairman, Nigerian Institution of Estate Surveyors and Valuers (NIESV) Faculty of Estate Agency and Marketing, Pastor Sam Eboigbe revealed, “the demand for low rentals in the property sector has largely witnessed some appreciable level of increase in demand since we started experiencing downturn in the economy, thus making the hinterlands to be the ultimate beneficiaries and the final destination for those relocating from the posh areas.
“This trend, which are mainly residential properties may not be attributed to the effects of Covid 19 pandemic as that only exist presently in the arena of speculation. The impact on those who may likely suffer lay offs or reduction in remuneration will not immediately alter the dynamics in the sector. Though, it is largely anticipated that the effects would start to impart the sector shortly essentially as the concept of online meetings and way of doing business is replacing old order.
“In the interim and Lagos State for instance, Mainland areas have tremendously witnessed boom in the quest of home seekers for residential property accommodation. Similarly, Lekki corridor offering residential property listings have become effective beneficiaries of opportunity offered by a shift in demand from posh areas to the hinterlands.
Some brokers also claim that the development is not being felt now and may take a while to manifest in the real estate market. Managing Partner, Ubosi Eleh and Company, Chudi Ubosi said demand and supply are hand-in-hand in rented accommodation market.
“Demand for flats and low budget homes remains high and are hardly impacted by these measures. This is because the gap between demand and supply is so wide. The demand is nationwide though accentuated in Lagos and many of the major economic cities like Abuja, Port Harcourt and Kano,” he said.
Ubosi revealed that the homes being searched for are primarily single rooms, one, two and three bedroom flats in locations that command low rents, especially in suburbs of the cities.
For the principal partner of Ismail and Partners and Chairman, Royal Institution of Chartered Surveyors (RICS), Nigeria chapter, Mr. Gbenga Ismail, “this cannot immediately happen. Rents in the outskirts will not rise because demand will not spike instantly.
“Rents are usually a year in advance so before you can see rent immediately rise it will take a while. Moreover those used to living in a certain way will still try to live in the same sort of even if is to go from mansions to flat,” he said.Eboigbe recommended that the government should as a matter of priority declare emergency in the sector. “This is to enable the sector attract appropriate attention of government who in turn would muster political will to address the myriads of challenges confronting the sector.
He also advised that the government at all tiers should remove all the bottlenecks associated with access to land. “The process of transferring title is presently fraught with irregularities due to some deliberate administrative bureaucracy and fraudulent practices of certain officials.
“The government should unbundle the present structure of our mortgage system to make it effective as it is in other climes. Access to funds is key and this level of intervention is crucial and needful.”
According to him, the price of building materials has remained relatively out of control. “This has made it practically impossible to deliver on affordable housing and also render all attempts by government to regulate the sector unsuccessful.”
Ubosi urged the government to solve the problem by reviewing the Land Use Act and ensure better access to land as well as create an enabling economic environment for businesses to thrive. For Ismail, lowering the cost of building materials and making land easily accessible will also ameliorate the problem.