The megacity of Lagos has been labeled the commercial hub of the country because of its financial viability as it generates about 75 percent independent revenue which is considered the highest internally generated revenue of all states in Nigeria. Lagos accounts for more than 60 percent of industrial and commercial activities in Nigeria. If it were a country, its 2010 GDP of USD 80M would have made it the largest economy in Africa.
Lagos is also home to the largest tech hub in Africa which qualifies it as a ‘land of opportunities’. These reasons explain why even though the smallest in land mass, Lagos is considered the most populous in the country. This brings us to the problem of housing. Statistics prove that there is an acute shortage of housing to the teeming population, with Lagos alone accounting for about a 5 million deficit representing 31% of the estimated national housing deficit of 18 million. The extent of the housing shortage in Lagos is enormous.
On another hand, some operators and stakeholders are concerned about the prices placed on the properties. Whether these prices are fundamentally driven or based on assumptions is the question.
The price of homes in properties has in no doubt skyrocketed over the past few months. This phenomenon can be attributed to several reasons including:
Excess demand over supply
The population-to-housing ratio in Lagos makes demand (the housing needs of those living in Lagos) exceeds supply (readily available housing for Lagos residents). As typical in every market, excess demand drives up prices. This makes landlords, who frequently get requests for their available spaces, increase the prices and let out or sell the property to the highest bidder.
Cost of land, building, and building materials
The cost of acquiring land in Lagos is very high, especially in areas in high demand. Also, the actual cost of building including materials, labor, government settlement, etc keep increasing due to economic recession and the rate of 1 naira to a dollar as most building materials are imported. These are valid reasons for the outrageous property costs in Lagos.
According to the real estate firm, land is a scarce commodity, and locations that are close to commercial and recreational activities such as Lekki, VI, Ikoyi and its environs create demand and push up prices. However, these price increases are not always rational.
It stated, “Availability of a large expanse of land in prime locations such as Ikoyi (especially Banana Island), Victoria Island, and Lekki Phase 1 is limited. As a result, the few landowners are increasing their prices to record levels, even in the face of high vacancies in some properties.”
The disparity in asking prices and achievable prices
Many realtors and developers may price properties well above their achievable price. This is done to leave enough room for negotiation and also to achieve the best possible price. This large spread between the asking and achievable price may in turn cause average market prices to become superficially high.
The above reasons and many others are rational explanations for the consistent increase in the cost of housing in Lagos.
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