Despite the lull in the property market, which by the third quarter of 2016 had seen 72 percent rise in vacancy rate in the highbrow locations, there is demand push for properties whose prices are naira-denominated, metrobusinessnews.com findings have shown.
The new demand wave which is mainly for residential properties in the high end submarkets such as Ikoyi, Victoria Island and Lekki in Lagos, Asokoro, Wuse, Garki etc in Abuja and Trans Amadi, both Old and New GRAs in Port Harcourt, is driven by buyers coming into the market with foreign currencies.
This is against what obtains in the commercial segments of the market, especially in prime office and retail space where rents and sales prices are predominantly dollar-denominated. “This class of properties is struggling because of the challenges in exchange rate”, says Bolaji Edu, CEO, Broll Nigeria.
The local currency in Nigeria has been devalued to a ridiculous level where the naira exchanges with the dollar at about N475 to a dollar, and about N530 to one pound, giving potential investors or home buyers who earn income in dollars or have access to dollar or pounds advantage in the local market.
“We have seen increased interest of over 20 percent from Nigerians in Diaspora to invest in property here, especially in those that are naira-denominated, because they are considered relatively cheap because of the weak naira which gives strong currency holders advantage”, Edu noted in an interview.
He explained that, for those who earn income in dollars, pounds or euros, the naira-denominated assets were very cheap for them, adding, “the price for them is cheaper by 50 percent in dollar terms; so, they see now, when the naira is devalued, as a big opportunity to invest in property in Nigeria”.
Maryanne Udo Okonjo, CEO, Fine and Country West Africa, affirms, disclosing that in some of the residential apartments they are handling, the have seen about 20 percent interest from Diaspora Nigerians that have translated to closed deals
“We have seen buyers who have bought before and are buying again because of the stronger currency advantage they have. Our Oakwood Residences in Ikoyi, which has been substantially taken up, goes for $350,000 which has never happened before. About 12 months ago, when the exchange rate was low, that amount, when converted, could only get a buyer a town house in somewhere like Lekki”, she said.
Continuing, she said, “this is a positive development and we are planning to take the Nigerian real estate to the world through our Refined Investors Series billed for the first quarter of 2017 in UK”.
Munachi Okoye, a close property market watcher and CEO, MCO Real Estate Limited, also affirms that Diaspora Nigerians see the falling naira as an opportunity to buy property in Nigeria. “We are currently dealing with interest from Diaspora Nigerians and sourcing property for them. I also know of others (friends and family) who are buying land in particular at this time”, he said in a telephone interview, citing Legacy Estates, a new residential development by Structura Casa LLB, that has been sold primarily to Diaspora Nigerians.
Similarly, Banana Paradise, a newly completed apartments block standing on three floors plus a penthouse in Banana Island developed by Lekki Gardens Estates has been sold out and, according to Toyin Omotilewa, a quantity surveyor at the company, the houses are now on secondary market for N80 million per flat, up from N45 million just a few months ago.
In Port Harcourt, apartments, duplexes and luxury villas in the Golf Estate located on Trans Amadi area of the Garden City has seen considerable rise in demand and Mustapha Njie, CEO, Taf Africa Homes—developers and promoters of the estate—says each of these house-types has seen over 35 percent price increase.
Edu pointed out however, that investors are now not only cautious, but also savvy, explaining, “when an economy is in recession, investors become more particular and cautious about what they put their money into. They invest in products whose quality, location, pricing, etc are right”.
He added that quality is of essence at a time like this, noting, “if you drive down a street in Ikoyi, for instance, you could see an apartment block that is completely empty. Further down the street, you could also find another block that is fully occupied and there is never a vacancy in such a block. This is because people have got limited finances and they still want to invest, so they have to look for quality assets”.
Recession notwithstanding, Nigeria remains a real estate investment destination in Sub-Saharan Africa. It has the potential to be the sub-region’s largest market but it is not at the moment because, according to the Broll chief executive, “there are still a lot of things that need to be done that can lead to increased investment interest in the country. One of them is lack of transparency in real estate transactions. The market is too opaque for people to understand it”.
He advised that the government needs to look into the cost of construction here because, compared to other countries, it is too high. “We need to reduce the cost of construction because it limits how much an investor can put on the market”, he advised further.