Abuja market: Between investors caution and compelling opportunity
Real estate investors have become very cautious with investment in Abuja, Nigeria’s federal capital territory, despite the compelling investment opportunity which the market in that small but very vibrant city offers. With a rapidly growing population of over three million, Abuja is a very strong market comprising A and B level consumers which underpins the residents’ potential buying power.
The city is said to have the highest per capital income in the whole of Nigeria and, according to a study on the city’s consumer spend by a private equity investment firm, there are over 68,000 households in that city with annual expenditure of over $150,000 per household. A recent report on real estate market review also estimates housing deficit in the city at 600,000 units.
But all these statistics, which used to be both compelling and emboldening to investors, no longer have the appeal strong enough to lure big property investors to the city. “While Abuja was found to have a housing deficit of 600,000 units, developers were however circumspect in starting projects, as effective demand was seen to be far less prevalent than housing deficit statistics suggest”, reveals the report which captured real estate market performance as at half-year 2017.
Nigeria’s housing market size is currently estimated at $179.2 billion which is a pointer to the investment potential of the market, but the report notes that market remains strongly influenced by macro-economic forces, which continue to put pressure on real estate prices.
“The anti-corruption fight, enhanced by the whistle-blowing programme, also reduced the willingness and ability of erstwhile big property investors to spend. Investors are largely worried that despite the much-vaunted Economic Recovery and Growth Plan (ERGP), the government was still playing too much role in the economy”, the report noted.
Before now, talk about the real estate market in Nigeria was about Abuja, Lagos and, to a lesser degree, Port Harcourt. Each of them is an investment destination of distinct character, but Abuja—the country’s political and administrative capital—stands today as albatross for its high vacancy rate.
As a haven for politicians, and a predominantly civil service city, the rental market in Abuja is very active in such areas as Wuse, Garki, Maitama up to Gwarimpa because there are a lot of people renting within the city. The suburbs are even more active.
Though Abuja is not in short supply of tenants or/and buyers, it has seen high vacancy rate in the highbrow areas like Maitama, Apo, Wuse among others. Apart from the anti-corruption crusade of the present government which is after people with questionable sources of income, Abuja developers are not so much worried about their empty houses. They fix their prices and allowed them to remain because they are not under pressure to sell or to rent.
A property vendor has confirmed to BusinessDay that Abuja developers are hardliners on issues of property prices, citing a particular property that came to the market for sell at N250 million. “A buyer offered N200 million but the owner stock to his guns at N250 million. Another property came to the market for rent at N15 million per annum; a tenant offered N12 million, but the landlord refused and the property has remained in the market since August last year”, he said.
A worrisome development in the market is the thinking by the Economic and Financial Crimes Commission (EFCC) that some people have laundered proceeds of crime through land and property acquisition more in Abuja than other parts of the country.
The commission once noted that the people involved in this act do not use financial instruments to make payment for properties, adding that such people do not bother to change ownership after such acquisitions, making it difficult to verify the identities of the new owners or the sources of funds.
Lagos is different. The state government puts the housing deficit in this sprawling city at 2.5 million units. Unlike Abuja, private sector operators are willing and ready to do business with government. In partnership with these private developers, the state will be constructing 20,000 housing units in the next five years under the government’s Lagos Affordable Public Housing scheme (LAPH). The state has also come with Rent-to-Own schemes which could be more effective where they are more easily accessible. It has also completed a series of developments as part of its urban renewal project. The 11-floor Isale Gangan towers and Gardens luxury apartments are some examples.
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