Sunday, January 29, 2012

Nigerian Properties - Affordable Properties in Ikoyi

The Law of demand and supply is one that even the most unschooled market women understand. If there is scarcity (low supply), prices go up as those who desire goods bid higher to ensure that they get them. On the other hand, if there are lots of goods available for sale, more than the volume of demand, prices drop as suppliers need to offload their stock.


A journey through Ikoyi will reveal as many as 16 building construction projects at various stages of completion.


In Old Ikoyi, which used to be the preserve of top Government officials, multinationals and embassy officials, supply of properties was restricted because those who owned the properties were not interested in selling them. That had the effect of pushing up prices and rental rates with rental rates as high as 0,000. The result of this was that most developments in Ikoyi were high end luxury flats, only for rent to those who could afford them.


In recent times however, things have changed.

The Federal Government of Nigeria sold over 800 of it's properties as well as over 4 high rise towers in the exclusive neighbourhoods. Embassies and High Commissions, which were moving to Abuja, also sold off their own properties. This ordinarily might not have had much effect on the market but as was discovered, most of the buyers of these properties were developers and investment speculators. The idea was either to buy the house on large acreages, demolish them and build high rises for lease or hold the properties as they were for a period and then sell them off.

The result of all the above is that Old Ikoyi has since become one big building construction site and there are several hundreds of undeveloped Ikoyi properties on the market for sale.


Pundits are of the opinion that due to market forces (supply of properties), a new class of estate developer will emerge that will target the middle classes with prices between N70 million and N90 million for flats or terrace houses.

These developers will in all probability not look at the rental market. Rather, they will target people who have a nostalgic hanker for an Ikoyi address. These developers will premise their strategy on the belief that the middle class will give up their compounds in VGC, Ikeja GRA and Lekki 1 for smaller apartments in Ikoyi. There will be a difference however, these 'middle class' properties will not be the high end type apartments with marble and granite finishes, swimming pools, gyms and other amenities but rather simple well built units. Their argument is that the Old Ikoyi market simply cannot accommodate all the luxury apartments if these are the only type of properties to be built there. The market has to be widened to accommodate the middle class.

Another group of analysts with a totally different opinion believe that those who own such properties have deep pockets and can weather the storm, waiting until they have the desired buyers/renters at the right price before dealing.


Who is right? Time will tell. But there is that tantalizing prospect that a new generation of Ikoyi landlords could just materialize.