One of the many lessons Nigerians are taking away from the economic recession which the country unavoidably walked into by the third quarter of last year is the need to ‘downsize’ almost every aspect of their existence to not just manageable, but, more importantly, to affordable level.
The past 12 months of economic downturn in the country has seen many families and even corporate organization downsize in such areas as the size of residential and office accommodation, change of location from expensive to ‘cheap’ areas, reduction in the quantity, quality and frequency of meals, the number of cars in family or company fleet, the number of workers and their take home pay, etc.
In real estate, a sector regarded as a laggard—always coming behind and reflecting the state of the economy, the situation is really critical and, for investors in the sector, it is a sobering moment as their market which used to be a rallying point for ready buyers and willing sellers is fast thinning out.
It has been a luxury market all these while, but the momentum is, increasingly, shifting to new investment frontiers or havens where the products on offer are those that speak to the market.
“This is no longer time for lavishness or super luxury”, says Udo Okonjo, CEO, Fine and Country. Her reason is that, at any point, whether it is upturn or downturn, the super luxury segment of the market is always a tiny one because not many people are playing there as buyers or sellers.
It is a tiny specialized market that is not for everybody and Okonjo’s advice for investors in the residential segment of the market is to create products that people want which shouldn’t be over priced. They should find a creative way of delivering convenience and luxury without breaking the bank because, if they do, they won’t get returns as people are no longer in the position to pay.
Increasingly, players are reinventing themselves, creating opportunities with solutions and developments that speak directly to the market. This gives investors clear view and understanding of the kind of properties people want to buy and where they want them to be.
Good location, good quality and appropriate pricing of products, according to Hakeem Oguniran, MD, UPDC, “remain the winning proposition for investors in the new normal we find ourselves now”.
Oguniran says the low to middle market where there are still first time buyers including professionals, young families, returning professionals etc forms the fulcrum of new investment frontiers. Some of these professionals, he notes, are not necessarily first home buyers, but people who are investing in order to get rental income as buy-to-let investors.
But Okonjo adds that the opportunity which exists in this market is for smaller residential units because these young professionals are no longer looking for 4 or 5-bedroom apartments because they can’t afford and do not even need them. “What they need is one-bed or two-bedroom for those that are planning to get married”, she notes.
In response to market realities, these days, room-sizes are getting smaller because of the cost of materials such that where there used to be three-bedroom of 250 square metres, what the market offers now is between 250 and 300 square metres, all depending on design which makes such rooms efficient and functional.
New developments going on in places like Lekki now offer studio, one-bedroom and two-bedroom apartments targeted at the young professionals and families. Similar developments are also coming up in Victoria Island, Oniru axis, etc such as The Coral being promoted by Grenadines Homes.
These smaller units are mainly being built in the outskirt of town but there is an opportunity for them in the city centre and also in the highbrow areas, depending on the size and price of the apartments as many of the mansions, especially in Ikoyi, Lagos are largely empty.
It is estimated that 50 percent of the high rise buildings in these location is vacant. Some of the buildings that appear to be 100 percent empty are generally old buildings which appear to be completely abandoned. But there are speculations that some of those buildings have the challenges of the tension between the federal government title and the Lagos State regularization scheme.
It could be argued, therefore, that lack of enabling environment is playing a key role in business people’s inability to create opportunities for people to own homes. In spite of the state of the market, especially at the high end, people still need quality properties there that are well priced.
This is because, old or new, if a property is over-priced because the owner is not interested in what the market is saying in terms of pricing, maybe because he is using it as a means of storing wealth, the house will remain vacant and continue to suffer depreciation and loss of value which are part of the costs of leaving a building without occupants.