Property Market Report

8/13/2019 Property Market Report

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the international market would rise

significantly. Bringing about similar

and quite sharp rises in cost of debt for

the investing public whilst closing the

door entirely for many. Furthermore,

as Nigerias reserves are in dollars,

and a devalued integrity-lacking dollarcould mean large amounts wiped off

the nations balance sheet.

On the European side however things

are generally improving. Investors

have been piling record amounts of

money into Europe and as the

continent pulls out of recession the

markets have concluded that the crisis

is over. According to the Financial

Times stronger exports and investor

demand have combined to push the

Eurozone up sharply. The region is

running a record current account

surplus; and this is expected to grow

as it continues to receive funds from

the rest of the world. However, some

feel that investors are overly optimistic,

possibly a flip side of their pessimism

over the dollar recently. Skeptics have

also noted that less financial pressure

on the European government has

already led them slow down the paceon reform especially over banking

union on the worst hit European

countries. Hence they warn that things

may get worse.

When it comes to !"#$%"&? in some

sense markets are largely shielded

from global events. The country

provides a unique opportunity to

strongly outperform global

benchmarks but at the same time

poses some of the greatest risks

known to the investment market. The

economic picture has been relatively

mixed over the year but there is a

general sense that things appear to bepicking up.Judging from the historic trends of the

poor implementation of multiple

infrastructural projects in Africas 2nd

largest economy, its no surprise that

over the years many of the countrys

problems still remain. But considering

the introduction of new dynamics in

the power sector together with strong

infrastructural prospects, things are

starting to look up.

Ms. Okonjo-Iweala, the Finance

Minister explained through local press

that the World Bank and International

Finance Corporation agreed to

mobilize global funds for Nigerias

power infrastructure development.

These organisations intend for Nigeria

to be one of their focus countries in

sub-Saharan Africa for their

predominantly power basedinfrastructure efforts. As a result they

are willing to invest hundreds of

millions of dollars. The Finance

Minister went on to explain that the

bank would also act as a catalyst for

further foreign direct investment,

providing an increased scope of

investment interest in the country.

Additionally, the recent privatization

the infamous power sector h

sparked some positive and negativ

controversy. Reuters reported earli

last month that the initiative was th

best chance to unlock potential

Africas most populous country, citinthat the power problems which hav

gone on for decades have long put

major brake on economic growt

Estimates from the Feder

government state that power relate

shortcomings cost up to 50

economic growth yearly, a fa

estimation as these set backs pus

business costs up 40%, sending awa

large internationals and glob

investors. It is clear that any form reform within this aging sector has th

ability to create enormous grow

within the distressed countr

Nevertheless, international and loc

press were quick to express conce

that many of the power assets went

local oligarchs raising fears of po

management in the near futur

Adding that when consideration

given to the poor state of existin

plants it will take a few years till resu

are observed. Some estimates tope$4b worth of repairs. Preside

Goodluck made similar remarks in th

change would not be overnight. On

thing is certain however, because

the choice privatisation bring

improvement is inevitable.

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finance will be more readily available

which will help to service the country

large infrastructure deficit. It can als

be argued that for Lagos, cor

development finance flows will b

directed towards the Lekki region a

projects such as Eko Atlantic ar

infrastructure have taken center stage.

Flagship projects like Eko Atlantic,

Lekki Free Trade Zone, Lekki as a

region itself, and multiple regeneration

schemes in areas across the city along

with the redevelopment of the Lekki

Express way have brought some

strong prospects for the future of the

mega city.

The Financial Times also recently

pointed out that Pension funds, which

represent a large chunk of

infrastructure investors in developed

economies have not really caught the

bait in Nigeria, YET. In more

developed economies pensions funds

are key development financiers, with

up to 20% of their allocation focused

on infrastructure. They generally have

a participation rate of 46% accordingto the Office of National Statistics in

the UK (2012). However, a poor

Nigerian participation rate of 3%,

growth of the pension pot from $2b to

$20b from 2004 to 2012 respectively

(26% Y.o.Y growth) strongly

demonstrates the potential for market

penetration. Signifying that the within

the next few years infrastructure

With regards to the future of Lagos,

Lekki is seemingly receiving a lot of

attention. The Lekki Peninsula, which

is approximately 70-80km long,

stretching from Victoria Island to the

west Refuge Island in the east

represents a blank canvas of endless

potential. Its no surprise then that

areas within the region have been

allocated for a Free Trade Zone, anairport and a sea port surely with a lot

more to come in the next few years. At

the moment it currently holds several

estates, gated residential

developments, agricultural farmlands

and more recently a wave of luxury

residential developments.

Infrastructure projects like the

redevelopment of the Expressway and

the Lekki-Ikoyi link bridge have

certainly played an active role inopening even more doors for this

promising area. Furthermore, the

approval of 2nd Niger Bridge is set to

connect Lagos to other parts of the

country and Lekki stands as the ideal

place to house wealthy relocators

amongst many others.

Furthermore, other aspects of

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Lekki Free Trade Zone

Lekki Epe Express Way


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If we assume a yearly target rate of return of 20% for each owner,

considering the behaviour of each owner who would perform betterafter 5 years?

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EXAMPLE SURVEY RESULT

Its simple. As long as the owner who accepted the lower rent

immediately can intelligently conduct a rent review after a year or

two, that owner will outperform others. Results from a survey of this

nature can be collated in report format to present to owners who are

refusing to market at reasonable prices and reassure them that they

can still perform well regardless.

A recent Survey from Fine and Country (figure 3) noted that growth is

coming from a combination of Owner Occupiers, the wealthy who arerewarding themselves with property luxuries and others wanting tomove out of outdated suburbs (like VGC) to trendy regions like Ikoyi.However, the investors still largely represent 50%-60% of demand,as only a small percentage of the market can own multiple properties.

The survey largely ignores the strong impact the international firms

and their expats have on driving the luxury real estate market in

Nigeria. Looking forward, with slight improvements in GDP growth

expectations

from the International Monetary Fund (IMF

coupled with falling unemployment in the United

States, United Kingdom and Germany (countries

with the largest amounts of expats in Nigeria) it canbe assumed that number of expats coming into

Nigeria over the next few years are set to grow

Local agents have already observed a larger inflow

of expats into the country.

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Lagos is recognised as one of the most expensivecities in the world, as a result of the high costs of property.

However, this is mainly as a result of chronic levels of

undersupply, which then presents a strong opportunity.

The Lekki region in Lagos has seen outstanding growth in

the past decade. According to the Nigerian Institution of

Civil Engineers the axis is the fastest growing real estate

corridor in West Africa. Reporting strong growth in the

number of people residing and working along the corridor.

Top Real Estate firms in Lagos like Fine and Country and

Fieldco have recognised this growth and are repositioning

themselves. Fine and Country pointed out in an interview

with CNBC Africa that Lekki is in growth mode and

foresee the region to be the core growth area within the

years to come.

It is believed that in the future Lekki Peninsula will be the

next commercial capital of Lagos state and also a city with

the best social amenities and infrastructure. Much of the

reason for the robust expectations and forecasts for the

region more recently are due to infrastructural projects

such a the Lekki-Ikoyi link bridge and the redevelopment

of the Lekki-Epe Express way. Business day reported that

property analysts believe the axis could play a major role

as the new investment hub for real estate investors as

Lagos gradually evolves into a mega city.

The Lekki-Ikoyi link bridge, which was commissioned bythe Governor earlier this year, noted that it has had a

significant impact on travel time in a manner that is

enhancing business. The bridge has changed the

dynamics of the real estate market in Ikoyi and Lekki. As a

result ample properties that were previously vacant are

quickly filling up, causing small price increases within the

region.

Moreover, the Lagos State Government report that the

master plan for Lekki will provide a built area that can

accommodate a residential population of about 3.4m

people and non-residential population of about 1.9mpeople. The government hopes that unique characteristics

of the Atlantic Coast, Lagos Lagoon and the inland natural

areas will be protected and enhance to give Lekki New

City the special natural ambience character. This is an

impressive improvement from previous development

schemes as sustainability is being considered. It is

important especially in Lagos to ensure that practices in

development are carried out sustainably considering the

current population and expectations for growth.

One question being asked is the extent at which Lekki

can hold Luxury properties now and in the future. There

certainly is a market, and it is growing. However, the

capacity can only hold a certain amount at the moment

as development in the region is still largely underway.

However, the future for Lekki is very promising and we

are strongly optimistic.

Eko Atlantic

Eko Atlantic, a multibillion-dollar investment provided

solely by private investors is a new city that has been

created in a bid to make it the financial centre of Nigeria

and possibly West Africa.

Like Lekki, this scheme is one that is getting a lot of

traction. Many are excited about the very well planned

scheme and believe that if completed and executed

properly will steal the shine from Ikoyi and V/I in the high

end residential and commercial real estate marketsrespectively.

Local agents explain that the plans that have been set for

development are unlike anything that have ever been

seen before and they have enough power to throw Ikoyi

off its throne. For real estate investors with large asset

holdings in Ikoyi, the best advice for them is to begin to

diversify. As a shift in the dynamics high-end residential

market is imminent.


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Fieldcos vision is to be the foremost property transactions company in Nigeria. We are passionate about providing afirst class property management service for our clients and improving the quality of accommodation provided.

Dolapo Omidire

Research Analyst

October-November 2013

[email protected]

http://uk.linkedin.com/in/domidire

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