Figures released by the Financial Derivatives Company Limited, a diversified financial services institution, recently, show that the sleeping Ikoyi, and Victoria Island real estate sector is not likely to stir from the doldrums any time soon.
Financial analysis describes the real estate market in Ikoyi and Victoria Island as a bad deal for investors at this point in time. The market for residential real estate is worse hit in these areas because of property promoters’ high asking price and an increase in the supply of residential accommodation on the Lekki/Ajah corridor, according to the Financial Derivatives Company’s survey report.
“Residential Real Estate is suffering and crying; high vacancy factor is experienced in the residential segment compared with the commercial segment, said the Chief Executive Officer of Financial Derivatives Company Limited, B.J. Rewane, who presented the findings of the company’s survey at the ‘Monthly Economic News and Views’ at Lagos Business School Executive Breakfast Meeting, recently.
Rewane also said high interest rate would continue to take its toll on the market, noting that shopping malls had the lowest vacancy factor in the sector and that adopted real estate was converting back to pure office blocks.
On the supply side, he said the boom in real estate market led to excess capacity, especially in prime areas like Ikoyi and Victoria Island, adding that home prices climbed above equilibrium levels.
The economic downturn, he said led to excess capacity and shrinkage in supply growth, increased downward pressure on prices and that the opening of the Lekki expressway increased supply and location pressure. “The supply side was also affected by bank foreclosures and fire sale.”
According to Rewane, current demand in the real estate market was significantly lower than in its pre-crisis position, adding that a “lull in business activities reduced demand for real estate; market sentiments suggest properties are still overvalued and higher cost of capital is affecting demand.”
For instance, statistics of Financial Derivatives Company’s survey of five streets in Victoria Island; Karimu Kotun, Elsie Femi-Pearse, Idejo, Kofo Abayomi and Akin-Olugbade show that there is 12.2 percent vacancy factor in all of the 159 houses in these streets; the 111 flats there have 43.25 percent vacancy factor, that of commercial real estate is 10.25 percent while the average residential vacancy factor is put at 21.22 percent.
In Ikoyi, a survey of five streets; Cooper, Probyn, Cameron, Glover, Lugard and Raymond Njoku shows a total of 295 houses with vacancy factor of 7 percent, 390 flats with 37 percent vacancy factor, that of commercial real estate is 10.5 percent while average residential vacancy factor is 19.42 percent.
Regardless, Rewane said the Asset Management Company of Nigeria’s (AMCON) holding period of two years has helped the market.
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