The Reverse Supply Curve of Property in Lagos; Real Estate Vacancy Index up by 4.2%


Tuesday, August 09 2016 5:23pm /fdc

Vacant properties in Lagos are not only enigmatic but also confusing to analysts.  Instead of rents crashing as housing supply increases, we are seeing landlord resistance and tenants walking away.

Lekki in particular, with a vacancy factor of 165, is witnessing a reverse supply curve (A fall in price should typically be followed by a decline in supply).

Increased tenant delinquency, a landlord’s worst nightmare, is now the order of the day.  In the attached slides, the FDC think-tank looks at the Lagos property market and its impact on your investment portfolio.

VFIX up to 172 in Q2 2016


Macro-economic Challenges Drive Increased Vacancy

·         Nigeria in recession means high vacancy rates

·         Carrying cost of properties is excruciating

·         Headline inflation at 16.5% is negative for real estate

·         After devaluation, property values appreciate

·         Replacement cost far in excess of market value

·         Cement price up 10% from N1500 to N1650

·         Building material prices sharply higher

·         Rents will spike after wage review

·         Real estate a perfect hedge against inflation



·         Declining purchasing power to dampen housing demand

·         Expect a move from prime areas to the suburbs

·         Expect an increase in new developments

·         Market recovery expected in 2017


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