Why the rent increase in various locations in Nigeria
August 17, 2022, 9:26 am Blog Renting Seen: 3740
Nigeria has a large housing deficit and a low homeownership rate, which has caused rents to rise nationwide, impacting people and endangering the rental sector.
The situation in the rental market in the past year has deteriorated due to growing inflation and high energy costs, with rent increases ranging from 30 to 40% depending on location and kind of home.
Rent for new construction has increased by up to 25% in the market. As opposed to N1.8 million and N2.3 million on the Lekki axis, respectively, one bedroom is now about N2.5 million, while two bedrooms are about N3.5 million.
The situation is worse in low- and middle-income areas of Lagos like Surulere, Yaba, Ilupeju, Gbagada, Egbeda, Ejigbo, and Okota. Landlords in these areas are bold in raising rents. Particularly in Surulere, rent increases have exceeded 50% for tenants.
In Surulere, a two-bedroom apartment currently costs between N550,000 and N700,000 years, up from N350,000 to N500,000 annually 12 to 24 months ago.
Nigeria is not an isolated incident, though. The country's rent issue is intensifying to the point where "nowhere and no one is spared," according to a new Bloomberg analysis of the US housing market.
In Nigeria, food costs have skyrocketed, diesel prices have increased by 136%, and inflation touched a five-year high of 18.6% in June. These factors have put tremendous pressure on nearly every household, reduced income levels, and reduced consumers' purchasing power.
Experts claim that the current state of affairs is such that rent default, which is a component of the crisis, now occurs everywhere.
"Rent default has become widespread. According to Gbenga Olaniyan, CEO of Estate Links Limited, "the top end, which traditionally had a low frequency of defaults due to the calibre of renters, has seen an upswing in rent default."
According to Ayo Ibaru, chief operating officer at Northcourt Real Estate, landlords are passing costs onto tenants as a result of rising prices.
A recent study by Estate Intel, an online real estate research company, of 22 estates in Yaba, Ikeja, Surulere, Victoria Island, Lekki Phase 1, Ikoyi, Osapa, Chevron, and Ajah in Lagos revealed that the average power tariff in these areas increased by 76 per cent from 90/KwH to 178/KwH between February and July.
Dolapo Omidire, the company's CEO, stated that these are some of the causes for the rent hikes the market has seen: "This is the period, according to the survey, when the price of diesel climbed 136 per cent from N330 to N780 per litre."
The US is not the first country to experience affordability concerns due to its high housing costs, similar to those in Nigeria. However, Bloomberg research claims that it has gotten worse over the past year as people have started moving back to big cities and certain locations with a shortage of housing have seen a rise in new residents.
The research stated that as a result of this year's sharp rise in mortgage rates brought on by the Federal Reserve's aggressive interest rate hikes, "demand for rentals has skyrocketed."
The Nigerian and US markets are similar in other ways as well. Due to the limited supply in the US, bidding wars are becoming more commonplace in the housing market. Landlords can raise rents at all price points due to rising costs and a lack of available apartments. And people have been forced to make difficult decisions as a result of the government eviction moratorium's expiration and the reduction in rental assistance.
80 per cent of Nigeria's 200 million people, or people, are thought to spend more than half of their income on housing. Similar to this, many US renters, who normally spend a larger percentage of their income on housing than homeowners, are already finding it difficult to keep up with rising grocery and petrol prices as a result of inflation that is almost at its highest level in four decades.
In Nigeria, inflation reached a peak in June at 18.60%, and estimates for July suggest that it may reach as high as 19.40%. Building materials prices are likely to rise as a result, forcing landlords and other space suppliers to raise rents.
Since leases are staggered and renters experience shocks at different times, rent increases are anticipated to be consistently higher in the US. According to data from the Labour Department cited by Bloomberg, housing expenses make up almost a third of the closely watched consumer price index, which rose by 8.5% in July compared to the same month last year.
"Since they make up the majority of renters, those of colour and those with lower incomes are most impacted by the rise in rent prices. Nearly 52% of Latino-led households and about 58% of Black adult-headed households in the US rent their houses, according to a Pew Research Center analysis of census data
The situation in the rental market in the past year has deteriorated due to growing inflation and high energy costs, with rent increases ranging from 30 to 40% depending on location and kind of home.
Rent for new construction has increased by up to 25% in the market. As opposed to N1.8 million and N2.3 million on the Lekki axis, respectively, one bedroom is now about N2.5 million, while two bedrooms are about N3.5 million.
The situation is worse in low- and middle-income areas of Lagos like Surulere, Yaba, Ilupeju, Gbagada, Egbeda, Ejigbo, and Okota. Landlords in these areas are bold in raising rents. Particularly in Surulere, rent increases have exceeded 50% for tenants.
In Surulere, a two-bedroom apartment currently costs between N550,000 and N700,000 years, up from N350,000 to N500,000 annually 12 to 24 months ago.
Nigeria is not an isolated incident, though. The country's rent issue is intensifying to the point where "nowhere and no one is spared," according to a new Bloomberg analysis of the US housing market.
In Nigeria, food costs have skyrocketed, diesel prices have increased by 136%, and inflation touched a five-year high of 18.6% in June. These factors have put tremendous pressure on nearly every household, reduced income levels, and reduced consumers' purchasing power.
Experts claim that the current state of affairs is such that rent default, which is a component of the crisis, now occurs everywhere.
"Rent default has become widespread. According to Gbenga Olaniyan, CEO of Estate Links Limited, "the top end, which traditionally had a low frequency of defaults due to the calibre of renters, has seen an upswing in rent default."
According to Ayo Ibaru, chief operating officer at Northcourt Real Estate, landlords are passing costs onto tenants as a result of rising prices.
A recent study by Estate Intel, an online real estate research company, of 22 estates in Yaba, Ikeja, Surulere, Victoria Island, Lekki Phase 1, Ikoyi, Osapa, Chevron, and Ajah in Lagos revealed that the average power tariff in these areas increased by 76 per cent from 90/KwH to 178/KwH between February and July.
Dolapo Omidire, the company's CEO, stated that these are some of the causes for the rent hikes the market has seen: "This is the period, according to the survey, when the price of diesel climbed 136 per cent from N330 to N780 per litre."
The US is not the first country to experience affordability concerns due to its high housing costs, similar to those in Nigeria. However, Bloomberg research claims that it has gotten worse over the past year as people have started moving back to big cities and certain locations with a shortage of housing have seen a rise in new residents.
The research stated that as a result of this year's sharp rise in mortgage rates brought on by the Federal Reserve's aggressive interest rate hikes, "demand for rentals has skyrocketed."
The Nigerian and US markets are similar in other ways as well. Due to the limited supply in the US, bidding wars are becoming more commonplace in the housing market. Landlords can raise rents at all price points due to rising costs and a lack of available apartments. And people have been forced to make difficult decisions as a result of the government eviction moratorium's expiration and the reduction in rental assistance.
80 per cent of Nigeria's 200 million people, or people, are thought to spend more than half of their income on housing. Similar to this, many US renters, who normally spend a larger percentage of their income on housing than homeowners, are already finding it difficult to keep up with rising grocery and petrol prices as a result of inflation that is almost at its highest level in four decades.
In Nigeria, inflation reached a peak in June at 18.60%, and estimates for July suggest that it may reach as high as 19.40%. Building materials prices are likely to rise as a result, forcing landlords and other space suppliers to raise rents.
Since leases are staggered and renters experience shocks at different times, rent increases are anticipated to be consistently higher in the US. According to data from the Labour Department cited by Bloomberg, housing expenses make up almost a third of the closely watched consumer price index, which rose by 8.5% in July compared to the same month last year.
"Since they make up the majority of renters, those of colour and those with lower incomes are most impacted by the rise in rent prices. Nearly 52% of Latino-led households and about 58% of Black adult-headed households in the US rent their houses, according to a Pew Research Center analysis of census data
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