A bitter quarrel has engulfed the prime property rental market as tenants whose property are denominated in dollars are protesting the skyrocketing of their rents due to CBN’s new rules on foreign exchange and seeking review of their rents as well as a possible denomination in naira

THESE are not the best of times for tenants in the prime property rental market, as restrictions on buying the United States currency are pushing up Nigeria’s home prices.

Mostly affected are apartments in prime areas in cities like Lagos, Abuja and Port Harcourt denominated in dollars, especially in Ikoyi, Victoria Island and Lekki in Lagos as well as Asokoro in Abuja. A weakening naira is also driving some property sellers to demand dollars.

The real estate market has been so hugely impacted by currency controls because some prime property are priced in dollars and mortgage sub sector is still grappling with issues of long term funding. The development has caused bitter quarrel between the homeowners and tenants while prospective tenants or buyers in most of the property are hard to come by.

In illegal street or black markets used to skirt currency controls, the Naira has slipped to 270 per dollar, the weakest in history and worse than the rate in the official market, which is controlled by the Central bank. The interbank market, the only window now available for the procurement of foreign exchange, is believed to be hit by the scarcity of hard currency.

Although the black market is saturated with the needed hard currency, it is more expensive to procure foreign currency at the unofficial market. While it is believed that the banks have been selling out more dollars to the operators of the black market for more gains. At the Interbank market the exchange rate is N192 to a dollar.

A new report released recently by Knight Frank’s Prime Global Rental Index, which tracks the change in luxury residential rents across 17 cities around the world, fell by 0.9per cent in the year to September 2015.

On a regional basis, Africa recorded the strongest rise in prime rents (up 1.3 per cent) and proved to be the only world region to record positive growth.

The strong US dollar, which is likely to be bolstered further as a result of the recent rate hike by the Federal Reserve, is driving U.S. corporate relocations, particularly to emerging markets in Latin America and Africa.     According to Mckinsey, by 2025 45 per cent of the Fortune Global 500 companies will be based in emerging markets, compared to 5 per cent at the turn of the century.

However, the development in the prime market was confirmed by the Africa President, International Real Estate Federation (FIABCI), Mr. Chudi Ubosi who told The Guardian, “Rents have basically remained stable in the last year 2015. It is not difficult to understand why – the poor political and in effect economic atmosphere.

“The reason why it could be said that rents increased drastically in 2015 can be tied to the rents that are denominated in USD. Imagine a property with rent of $700 per square meter at the beginning of the year when the exchange rate was N170 to a dollar.

“Now imagine same property even at the same rental value but with exchange rate (unofficial) at N280 to a dollar. Rent can easily be said to have increased by 60/70 per cent. It has basically become a nightmare for a lot of the organizations involved. You must also remember that these companies source their business here in Nigeria and payments are made in the local currency.

“Our experience in the last six weeks with a couple of the properties we are involved in is that most of the tenants are asking for a downward review of their rents and a possible denomination in naira. It is clearly a big dilemma for all parties and clearly highlights the risks in our environment and investment in our economy.”

Another real estate professional, Akin Olawore explained that the high-end exclusive serviced apartments in the Lagos Island remained stagnant while the middle and lower end saw rents fall.