Why property prices are expensive in Abuja

Over time, the Abuja real estate sector has been a subject of interest to many local and foreign investors.

This is understandably so considering the place of Abuja as Nigeria’s Capital city and Center of politics which is gradually turning into a hub for multiple business activities.

As a result of massive influx of persons it is clear that the FCT with it’s population of over 3.6 million people is grossly becoming under accommodating for it’s residents in terms of affordable housing units, amidst the burden of inflation and the constant fall of the Naira against the Dollar in the foreign exchange market which forms the basis upon which property owners have constantly pegged the prices of the land or houses. Coupled with the effect of the covid-19 which drastically affected cost of building materials by almost about 200 to 300% increase

Amidst Nigeria’s 17 million housing deficit, unoccupied houses still dot Abuja highbrow areas.

At a time when many Nigerians have no roof over their heads, many empty houses, mansions, estates in Abuja highbrow areas should be something of great concern, especially to those in authority.

With an estimated housing deficit of over 17 million units, the foreseeable future of the housing sector in Nigeria, no doubt presents a grim picture.

It is no surprise that even in Abuja, some residents of the Federal Capital Territory (FCT) still sleep in slums and other unsafe places like motor parks, major bus stops, filling stations, street corners, under the bridge and uncompleted buildings.

In Abuja, names such as Asokoro, Maitama, Jabi, Wuse 2 and Gwarimpa are places associated with wealth and fame. The mansions are well-built, tastefully furnished, high fences with stern looking guards. Due to the expensive nature of the place, you only find the high and mighty in the society living there. People, who reside and have properties in such highbrow areas, are usually politicians, diplomats, top ranking civil servants and successful businessmen and women.

Unfortunately, most properties in these highbrow areas are hitherto empty either because their prices are exorbitant or the owners cannot be reached. For instance, one plot of land (in a good location) in Asokoro or Maitama goes for between N120 to N150 million.

Perhaps, this explains why over 80 percent of Abuja residents reside mainly in the satellite towns and remote communities where they can easily afford the rent. On the fringe of Maitama is Mpape, an urban slum with a high population density. Also at the back of Asokoro is Asokoro extension, a growing slum with a huge number of people.
Despite this huge amount and coupled with the prevailing economic situation, it is said that some politicians and top government officials are clandestinely buying properties and building houses with fake names.

Meanwhile, a question or concern of some operators and stakeholders is whether the prices placed on the properties are fundamentally Within the reach of the over 3.8 million households in the city. Up to 2.1 million households are without formal housing. This presents a supply gap of over 55%. As typical in every market, excess demand drives up prices. Estate Intel stated that this makes landlords, who frequently get requests for their available spaces, to increase the prices and let out or sell the property to the highest bidder.

Lack of transparency between asking and achievable prices
Estate Intel notes that the multiple agents and developers typically list properties significantly higher than what they are prepared to achieve.

It stated, “We expect developers or agents to aim to achieve the highest possible price, with a window for negotiation, leaving a wider than usual spread between asking and achievable prices.

“A large spread in between asking and achievable rent makes average market rent seem artificially high and encourages other developers to hold fast on those artificially listed prices, keeping average rents or sale prices high.

“This is very misleading especially because most of the properties on the listed platforms in Nigeria are priced well above what is achievable.”

Construction cost and land price
The real estate operator explained that the high cost of acquiring land, including the actual cost of building, also adds to the reasons property prices in Lagos are high.

“We analyzed four brand new projects in high brow areas of Abuja With sale prices ranging between 21m to 24m for the 2-bed apartment and 620m for a 6-bed room, all developers maintained profits ranging between 15% and 36% and rental yields of 2% to 7%.

“Our analysis shows that land acquisition and construction costs contributed 22% and 64% to the total cost of development respectively, for the Maitama project, however, the split was 53% and 47% respectively.

“The skew is due to the fact that places like Wuse and Garki (with an average land price of ₦78,000 per sqm) are relatively cheaper than the more pronounced (Asokoro and Maitama where the developer bought the land at ₦400,000 per sqm),” it added.

Excessive speculations
According to the real estate firm, land is a scarce commodity and locations that are close to commercial and recreational activities such as Wuse, etc create demand and push up prices. However, these price increases are not always rational.

The report further went to highlight that “Availability of a large expanse of land in prime locations such as Maitama (especially Central Business District), 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.”

For instance, to our surprise, in early 2020, asking prices for land in Central Business District were around ₦400,000 to ₦600,000 per square meter, but it now sells for as high as ₦800,000 to ₦1,000,000 per square meter. driven or based on assumptions.

With over 3.8 million households in Abuja, up to 2.1 million households are without formal housing. This presents a supply gap of over 55%. As typical in every market, excess demand drives up prices. Estate Intel stated that this makes landlords, who frequently get requests for their available spaces, to increase the prices and let out or sell the property to the highest bidder.

Lack of transparency between asking and achievable prices
Estate Intel added that the multiple agents and developers typically list properties significantly higher than what they are prepared to achieve.

It stated, “We expect developers or agents to aim to achieve the highest possible price, with a window for negotiation, leaving a wider than usual spread between asking and achievable prices.

“A large spread in between asking and achievable rent makes average market rent seem artificially high and encourages other developers to hold fast on those artificially listed prices, keeping average rents or sale prices high.

“This is very misleading especially because most of the properties on the listed platforms in Nigeria are priced well above what is achievable.”

Real estate operators also said that the high cost of acquiring land, including the actual cost of building, also adds to the reasons property prices are high in Abuja

“We analyzed four brand new projects in Karsana, Gwarimpa and Wuye, With sale prices ranging between 21m to 24m for the 2-bed apartment in Gwarimpa and 620m for a 6-bed house in Wuye all developers maintained profits ranging between 15% and 36% and rental yields of 2% to 7%.

“Our analysis shows that land acquisition and construction costs contributed 22% and 64% to the total cost of development respectively, for the Maitama project, however, the split was 53% and 47% respectively.

Source: African Housing News

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