Developers, investors shift to small- sized apartments amid increased demand
The economic meltdown and high inflation rate ravaging major cities are increasing demand for low budget apartments among millennial, young professionals, families, and prompting property developers to take advantage of the situation. The studio, onebedroom, and two- bedroom apartments are now becoming the choice of many in the real estate market, writes VICTOR GBONEGUN.
THERE has been an uptick in demand for smallsized housing units across the country, following low purchasing power of wouldbe buyers, increased preference among millennial and first- time homeowners.
The poor state of the economy has not helped many Nigerians as they grapple with headline inflation that rose to 31.7per cent in February 2024, up from 29.9 per cent in January and mainly because of oil subsidy removal and devaluation of the naira. The effect is that spacious and high- end apartments have gone beyond the budgetary limits of the salaried class and upcoming adults in major cities.
The Guardian gathered that larger units of three and four- bedroom apartments based on empirical market analysis have become a burden to their owners, as it’s usually the last units to be sold in most residential developments. The trend made it difficult for many property developers to offload units built for high- end of the markets, and necessitated a shift by investors toward smaller housing units such as studio, one and two- bedroom apartments in tier 1 cities like Lagos, Abuja, PortHarcourt, Ibadan, FCT, Onitsha, Aba, Kaduna, Ilorin among others.
With the development, tenants are reducing their budgets, and limiting spending on renting threeor four- bedroom apartments, which can be as high as N1.5 to N1.9 million in strategic areas. Most Nigerians now prefer to downgrade to smaller units that hover around N500, 000 to N700, 000 for onebedroom or two bedrooms at N900, 000 or N1 million to meet needs like feeding, school fees, and clothing.
According to a report by Lagos real estate firm, MDS Properties, of the 428 apartments surveyed in Victoria Island, over 369 units were sold amid an apparent lull in the market.
A further breakdown of the units sold, indicate that they comprised 38 per cent of one- bedroom apartments, 43 per cent of two- bedroom apartments and 19 per cent were three- bedroom apartments.
A one- bedroom apartment comes with a bedroom, living room, kitchen, and bathroom. In terms of size, such apartments range from about 400 square metres to 600 square metres with a price range from N20 million to N40 million, for outright buyers. The trend is now common in Lagos areas such as Maryland, Lekki, Victoria Island, Ikoyi, and other strategic locations.
However, experts say the increase in demand for such units is based on the need of the market, not that they are affordable housing, adding that investors want to recover investment cost, especially on land, labour and building materials.
They said young adults, including ' Gen Zs’ and other young professionals are making studio apartments to gain more recognition because they don't need much space in the city centres and environment, where they move to achieve their dreams.
The President, International Real Estate Federation ( FIABCI), Nigeria Chapter, Mr Gladstone Opara, who confirmed the development, attributed the trend to the economic reality, and rising rent, which is making people scale down their expenses. “There is an increase in the demand for two- bedroom flats. The reason is that families are downsizing and the majority of the elites are not with their families,” Opara said.
He said ongoing developments are tailored towards one- bedrooms, and twobedroom flats. “The number of singles and young professionals is increasing and you don’t expect them to live in three- bedroom or four- bedroom flats. They prefer one and two- bedroom apartments. In some cases, the rent for two and three- bedroom flats are the same. In some places, a three bedroom is as high as N6 million, while for a twobedrooms is pegged at N5 million,” he said.
Opara said many property developers are taking advantage of the need by concentrating on one- bedroom, and two- bedroom apartments. He also revealed that inadequate supply has necessitated an increase in rental prices.
A fellow of the Nigerian Institution of Estate Surveyors and Valuers ( NIESV), Mr Adiat Adeshina, said the increased demand is as a result of the need in the property market and economic situation. He explained that people who recently gained employment, those who have smaller families, as well as newly married couples fall into the category of people requesting for one and twobedroom apartments.
Adeshina said: “The demand for smaller apartments is high in the city centre and outskirts of the city like Abuja. People are adjusting their budget as most people don’t have big families now. The high cost of rent now is forcing people to adjust their budget; those who cannot afford to pay for three bedrooms are cutting down to either one or two bedrooms. The few who demand for three or four- bedrooms are the category of people with large families.”
Immediate past president, Real Estate Developers Association ( REDAN), Dr Aliyu Wamakko, admitted that developers are concentrating on smaller units because the purchasing power of most Nigerians has been depleted due to poor economic situation, especially the impact of fuel subsidy removal.
He said the situation has caused low and middleincome earners to downgrade their accommodation space, explaining that those who were living in three- bedroom flats now opt for two- bedroom, while those living in a two- bedroom now go for one- bedroom apartments.
“The new trend is as a result of the inability of developers to recover investments in high- rise buildings of more than two- bedrooms, as it ties down their finances over a long period of time. Unfortunately, some of our developers borrow money from commercial banks or elsewhere, and there is nothing they can do regarding such because the interest rate will keep rising. “The best way to get out of the situation is to embark on development within the price that middle income earners can afford. If you take a census on how many people buy a house of N100 million and those who will buy a house of N15 to N20 million. The category of people who could buy a property between N15m to N20m will be more and that is why developers are concentrating on one and twobedroom units,” he explained.
According to him, most of the facilities that come with such developments are standard facilities provided by the developers because the government is not providing infrastructure. He added: “Common facilities like transformer, industrial borehole are provided because the government does not care about people living in satellite towns whereas if the level of infrastructure is improved in the satellite towns, it will reduce the population within the city centre and other areas,”
REDAN Chairman, SouthWest Zone, Dr Kunle Adeyemi, observed that the new trend was predicted five years ago in the real estate sector, saying, it did not come to them as a surprise.
He argued that before now, the methodology is that developers build to sell without consulting consumers. “We have now realised that real estate endusers are now conscious about space that works, and the majority prefers compact and smart homes because of the paradigm shift in the statistics of consumers.
“Previously, those that buy real estate products are within a certain age bracket but now, there has been a shift where young Nigerians of 20- year bracket consume real estate products and their mindset is for a functional space. They’re less concerned about big space, but smaller apartments such as studio apartments that are smart, and comfortable. These individuals cannot go for a three- bedroom apartment,” he said.
Adeyemi, who doubles as the Chief Executive Officer, Sterling Homes, emphasised that small unit developments are a trend highly considered in Nigeria, whereby people can buy real estate products that meet their needs, adding that when their families increase, they could demand for one- bedroom or two- bedroom apartments.
“We have noticed through statistics that people just want to have two or three children and a two- bedroom is always considered. Developers and builders have now changed from building to sell to first consider the needs of consumers and build to meet their needs. This is why we are not seeing big buildings such as three-, four- and fivebedroom apartments,” Adeyemi said.