- From Blog Archive
'High property prices can't be justified' - THE NATION
High property prices in Nigeria, especially in major cities, such as Abuja and Lagos, cannot be attributed to any factor in the real estate sector. Rather, they seem to be driven by factors peculiar to the country than what obtains elsewhere in the world.
A realtor and former President, Nigeria Institution of Estate Surveyors & Valuers (NIESV), Mr. Bode Adediji, said this in Lagos while reacting to the high property prices in Abuja and other major cities and the current glut in the market. He said before now property prices, by any definition in major cities, were artificial because there seemed to be an avalanche of free money to either build or purchase property unlike the current situation where there is a glut in the market.
According to him, in the days of high rentals in Abuja, civil servants and low-income earners resorted to seeking accommodation on the outskirts such as Gwagwalada, Deidei and Mararaba while others went to Zuba , Karo, Nyanya and Kubwa.
While in Lagos, people moved towards the Lagos-lbadan Expressway and Lagos-Abeokuta way; generally a large percentage of people became realistic with where to live.
He, however, noted that the biggest drop in rental affordability over the past years are in areas such as Asokoro, Maitama, Wuse I and II, Jabi, and Garki, where two-bedroom flat dropped to between N1.8 million and N2 million per annum unlike before when it was as high as N3 million.
He added that areas traditionally seen as some of Abuja's most affordable also recorded a significant decline compared to the rest of the Federal Capital Territory (FCT).
Adediji attributed the crash to the abrupt stoppage of privileges, noting that some current policy measures of the government on property acquisition and requirements such as reporting the purchase of some certain class of property to the Special Fraud Unit (SFU), the Economic & Financial Crimes Commission (EFCC), and the Federal Inland Revenue Service (FIRS), mostly for tax reasons.
On why property prices are falling, he said property prices usually fall on election year as some people may want to dispose their property to pursue their dream property and may settle for any offer.
He said all these put together may have caused the reported crash in property prices, which he said had no reason to be as high as they were before now.
Adedeji said: "Ideally, real estate investments and projects are always seen in all countries as medium to long-term projects. When you see that the rate of economic growth and the migration of people from certain income class to another is either not improving, but retrogressing in this scenario building, for that particular class of people, that may not be a wise decision.
"They may be rightly referred to as endangered species because it is almost certain that in the nearest future you cannot foretell their ability to take-up such property. That in my mind is the main problem that we have had in Nigeria."
He maintained that so far, developers are building for a class of people, who are either expatriates coming into the country or people migrating from low to medium and high income areas to premium areas. For these set of people, as soon as there is recession there will be no effective demand for such products.
Adedeji advised that to avoid this, developers should be proactive and futuristic in concept, planning, financing, development and construction. 'If a developer goes to a bank to borrow money to build luxury estate for a class of people that are no longer available or dwindling, that is crisis from day one that you are courting," he said.
The former NIESV chief stressed that there are expectations from the government and real estate investors to ensure that whatever product rolled out by them, the burden of infrastructure development should be taken away from them.
Unfortunately, Lagos, according to him, has not been of much help as the government seem to be largely interested only on the Lekki/Epe axis to the neglect of other areas such as Badagry, among others.
However, Broll Property Group Nigeria Chief Executive Officer, Bolaji Edu, stated that following inflation and subsequent re-adjustment, the real estate market is now on a more long-term stable footing.
He said: "The market has begun to rebase itself down from a level comparable to the wealthiest cities in the world such as New York and the outskirts of London. This is most evident in the reducing rates in the commercial and retail sectors, which are now at more sustainable levels."