What Drives Real Estate Valuation In Nigeria? - Properties - Nairaland
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| What Drives Real Estate Valuation In Nigeria? by Underdogg(m): 1:55pm On Oct 12, 2013 |
How is it that real estate is so costly in this country? Why? Are the prices of land and landed properties in any way controlled by demand and supply market forces? How is it that in this our beloved country, plagued with religious, political, economic, social and all sorts of insecurity, a so-called choice real estate is available at costs which meet and in some cases exceed those in Tokyo, California, Paris, London? What drives the valuation? I am almost losing my mind trying to figure this out. Why does property in Nigeria cost so much to own? I understand that there are super-rich Nigerians out there, but what percentage of the population are they? According to World Bank, about 67% of Nigerians live below the poverty line. If there are so few extremely rich and so many extremely poor, then who can afford all these high end properties? Certainly not the middle class… I happen to be middle class and, having looked around, I get the sinking feeling that I can’t afford to own the kind of housing I believe my family deserves. I’ve been to Lekki (Lagos), Garki (Abuja) or Trans Amadi (PH) and it saddens me to see those houses… actually there… but so unbelievably expensive… and so frustratingly unoccupied. And please don’t tell me about loans or mortgage financing because to me, the available interest rates as at now look like a polite way of asking the low to middle income earners I.e. the general populace, to go to blazes. So who owns all these properties? And who do the owners expect to buy them? If I were a super rich guy I wouldn't go buying a terraced house from some other rich guy, I'd probably go build my own set of terraced houses. But if I couldn't sell them off would that be a good enough investment? Can anyone please explain what is happening on Nigeria’s real estate market scene? How sustainable is this (in my honest opinion) madness? 1 Like |
| Re: What Drives Real Estate Valuation In Nigeria? by spyder880(m): 5:29pm On Oct 12, 2013 |
Sentimental analysis is what drives the valuation. |
| Re: What Drives Real Estate Valuation In Nigeria? by ifebosco: 9:18pm On Oct 12, 2013 |
cost of land is expensive because Nigerians are gullible people, cost of building a house in Nigeria is expensive because the raw materials are very costly, cement and rod for example are more expensive in Nigeria than most of the industrialized countries because of monopoly greed and wickedness 1 Like |
| Re: What Drives Real Estate Valuation In Nigeria? by kopell: 1:03am On Oct 13, 2013 |
Do you want to know who owns those properties ? Look around you. People like governors, ministers, permanent secretary's in government. Bank director and senior managers, etc. I just wrote an article on the same issue two weeks ago. As far as people have access to steal government money, this sentiment will not stop. Many of these so call leaders used to bring their stealing loot to the west, since September 11 2001 it has been very difficult to stanch their money to the west. They used those stolen money now in Nigeria to buy many properties at any cost with no apprise to it value. Any way it stolen money that cant be kept in bank, because they have enough money in the bank already. Only God will save us from these so called leaders and "ogas at the top". |
| Re: What Drives Real Estate Valuation In Nigeria? by spyder880(m): 5:19am On Oct 13, 2013 |
I think this thread deserves the front page, can we get our Oga lawyer to push this thread to the front page for us? |
| Re: What Drives Real Estate Valuation In Nigeria? by Cyberknight: 9:44am On Oct 13, 2013 |
q |
| Re: What Drives Real Estate Valuation In Nigeria? by Cyberknight: 9:44am On Oct 13, 2013 |
Aha, at last some right thinking people are also beginning to wonder. The prices of property in Nigeria are so stupidly and unrealistically high that there must be a crash at sometime. Take prices in Victoria Island and Ikoyi (places that are really slums by international standards) which run into the hundreds of millions or billions in some cases. Billions, for goodness sake. That's like 4 million pounds or so. I could buy like 10 reasonable houses with 3 or 4 bedrooms in the UK for 350,000 or 400,000 pounds with that amount. Even the house I live in here in Lagos (block of 4 flats) has an assessed value of about 140 million naira. That's almost a million dollars, for goodness sake. With a million dollars in the U.S. I would be living near some Hollywood actor or sports millionaire. In addition to these ridiculous prices, there are no mortgages or any form of credit available, so the market is cash and carry. With such stupid prices, its not just the middle class, but virtually everyone who's not a politician or a big company exec who's been priced out of the market. Obviously, this cannot continue for long. In a country where the majority of the population cannot afford to buy reasonably located land or real estate (i.e not buying cheap land in a village or land on the very outskirts of a town or urban agglomeration) this is an untenable situation. |
| Re: What Drives Real Estate Valuation In Nigeria? by bugmenot: 11:46pm On Oct 13, 2013 |
Demand also plays a role. Relative to US and UK properties, Nigerian properties are assets. With mortgages and tax obligations, US and UK real estate could easily become liabilities. |
| Re: What Drives Real Estate Valuation In Nigeria? by Underdogg(m): 6:15pm On Oct 17, 2013 |
In other words no show for an honest man rising through the ranks? @ kopel... does this mean it wasnt as bad as this before 9-11? Haba... do these people even ever stop to think about the amounts they append to these properties? How can I remain in my right mind and buy a plot of land in Lekki for upward of 30mill and still have to sand fill it because I got a very choice chunk of West African Swamp/marshland/reclaimed Atlantic Ocean? With rusty brown 'potable' water... come on! |
| Re: What Drives Real Estate Valuation In Nigeria? by Cyberknight: 7:41pm On Oct 17, 2013 |
bugmenot:This doesn't make sense. The whole point of the poster's complaint is acquiring these so-called valuable Nigerian assets in the first place. You obviously have to acquire them before you start to suffer from the associated tax obligations. As for mortgages, credit is the essential lubricant of any developed society - it may have been abused in some places, but the old dictum of moderation in everything still applies and this does not diminish in any way the huge value of the mortgage as a device for helping people own property. |
| Re: What Drives Real Estate Valuation In Nigeria? by Cyberknight: 7:44pm On Oct 17, 2013 |
Underdogg: In other words no show for an honest man rising through the ranks? My brother, follow me check am o. |
| Re: What Drives Real Estate Valuation In Nigeria? by bugmenot: 6:06am On Oct 19, 2013 |
Cyberknight: I'm not sure I get your point. What, in your opinion, drives real estate valuation in Nigeria? Especially as mortgages are hardly available to the common man. With barely any credit facilities available, property values continue to double overnight. What do you think would happen to property values if mortgages are made available to the common man? Don't get me wrong here - housing should be within reach of the average man. |
| Re: What Drives Real Estate Valuation In Nigeria? by kopell: 3:16pm On Oct 19, 2013 |
@All this is very interesting debate about Lands and properties cost in Nigeria. I wish Lawyer make it a first page on these forum. I have read for, and opposing opinions in comparing Nigeria properties as an asset. @bugmenot in that of your opinion properties could easily become a liability in the west. May I ask you some questions in regards to properties that can easily became and liability in the west, first most of people that but those properties can them afford them. In the last 100 years investing in properties is still one of the most profitable investment for middle income people in the West. They have an obligation to pay property taxes for a long time and ensuring long time employments due to commitment to mortgage payment. A property owner in the west can borrow against his property and use the money for other business. I have no idea what part of the west you reside but her in the U.S, particularly State of NY , if you have an opportunity of owning a property in NY. If you go through your monthly mortgage payment you will be very happy to see how your property tax is being used to finance many social welfare programs including your local school district. That is just one of the advantage of running a mortgage type property system, our government don't have to use other government resources to finance education in our country with this mortgage system alone you can eradicate literacy and well financed sound education system in our country. If only we can put better policies to appraise our properties back home in Nigeria. These are some of the issues why Nigerian properties are so expensive. First of all, in the last 30 years or since 1978 we have no legislative law that make any changes to Nigerian land act, (If I am wrong please correct me). If one says a property is an assets in Nigeria I will not argue much, but one will look how much money he or she has invested before it became an assets. I can understand most of us has Nigerians are mostly shying away from our Tax obligations. If we don't have any changes in the Land act of 1978 till date in Federal level, with the present one that gave State Governors so much power on their state lands. How are we going to make changes that is going to liberalize our land to be easily accessible without this unstandardized procedure across the country. Sometimes one can not blame investors that invest so much money in acquiring land to put a structure on it. They will like to gain from their investments, so with these prices will not decrease as far as there is a high demands and short supplies. With these government ridiculous fees and rules that make it very difficult for private investors to invest in housing sector in our country. I believe shelters should be a right in our country not a privilege. Questions people are not asking for most of these government estates especially in Lagos State I don't know if anyone has been paying attention to some of these government estates or Land allocations in Lagos State which they have earned Millions if not Billions from innocent citizens in the sake of gaining a land allocation in their estate all around Lagos, with nothing to show for all these years. I will mention a few of them (If I am wrong please correct me). I believe many Nigerians have subscribe to some of these lands as far back as 4 or 5 years ago, with money for infrastructures land development convey fees has been paid along with application fee's for over 4 years ago. Most of these estate can only be identify with a sign board on the locations. What happened to those people's money? If the government is so busy taking innocent citizens money in promised return of building beautiful estates across the state and four years later after most of the fee's have been paid and the location still remained what it was 4 years earlier why? Why can't the government subcontract the jobs to private sectors to create jobs for general populace. To me I believe money shouldn't be an issue when people have paid for those services. |
| Re: What Drives Real Estate Valuation In Nigeria? by bugmenot: 8:51pm On Oct 19, 2013 |
@kopell You raise a good point - in the west, many people buy properties they can't afford. But why is that so? Because they can borrow now and "promise" to pay back tomorrow! The mortgage system is great if not abused, remember that people "buying" properties they could not afford was the norm for a long time and it contributed immensely to the mortgage crisis. Borrowing against your property is really just a short cut to taking another loan from the bank and it's attractive because mortgage interests are often lower. And don't forget that paying for one property for 30 years almost makes one a lifetime debtor, how much more when you continue to borrow from your equity. Public schools and amenities are great, but remember we still have federal government colleges and federal universities in Nigeria, though competitive these are mostly within reach of the common man. A little more contrast - In the US you could easily lose money when you sell your property, of course the longer you own it the less the likelihood. In Nigeria, on the other hand, it's a rarity that you sell property for less than you bought it even after factoring in inflation. And this is almost irrespective of the time interval between when you bought and when you choose to sell. I've seen land values double in a year or two. One question - where in NY can you afford to have a vacant property and for how long can you keep it vacant while servicing the mortgage and taxes? Most people are under pressure to sell or rent out their homes as soon as they move out so they can cope with their mortgage obligations. In Nigeria on the other hand, this is very common. If nowhere else, in the villages. In all honesty, each system has its own advantage. We just need to take the best advantage of the system in which we find ourselves. On a lighter note, I've lived in Beantown for almost a decade so I'm not far away from you afterall :-). 1 Like |
| Re: What Drives Real Estate Valuation In Nigeria? by Cyberknight: 10:21pm On Oct 19, 2013 |
Not very sure about what obtains in the U.S, but I believe the essentials of the property financing/mortgage system are the same wherever its available, but let me only talk about where I'm familiar with. The point at issue being that property in good ole Naija is much better than property in the developed world as it comes with fewer strings attached by way of mortgages and tax obligations. Again, I point out that the poster who started this thread was complaining about the exorbitant prices of real estate in Naija, while Mr. Bugmenot contends that yes, prices may be high, but having paid them one gets an asset that is intrinsically more valuable than comparable assets abroad. I don't believe the issue of property taxes should be raised, because inasmuch as Nigerians don't like paying tax because they dont get anything from the government in return, the same does not obtain elsewhere (in the UK, for example), where one gets decent state-funded education, the much derided but still functional NHS, wonderful public transport, etc, etc. The only debate in these cases is how much tax should be levied, not the pros and cons of doing so. With respect to property financing, may I point out that the ability to buy property on credit is the very thing that has made it possible for most people in developed countries to own homes in the first place. So the property market there is like any other, maybe like the used-car market, for example, prices fluctuate with the times and so forth, because property is within everyone's reach. A single house or flat can change hands several times in the course of a decade, for example. Many people even take out financing to buy homes to save on rent, for example, and sell after a couple of years when they want to move. To the best of my knowledge, in the UK at least, there are no particular disadvantages associated with taking out financing to buy property as Mr. Bugmenot asserts. In such a transaction, naturally both parties (the lender and the borrower) have rights and obligations. But the point is that the very utility of being able to buy such a major asset on credit outweighs whatever perceived disadvantages that may be associated therewith. Yes, mortgagors may default sometimes and have their property foreclosed on. That is not a disadvantage in itself - in the UK if a mortgagee forecloses on your property,they must sell it at the best price obtainable and after taking what you owe them and any reasonable costs associated with the sale, they must return the balance thereof to the mortgagor. Interest rates are usually stable. Property values do fluctuate, but again so does almost everything else. So I fail to see any inherent disadvantages in taking out financing to pay for assets that make such assets less valuable than Nigerian ones. Finally, the only thing that can be said for Nigerian real estate (in the major towns at least) is that adjusted for inflation, property values do tend to go up, not down. But considering the inherent structural weakness in the Nigerian system of acquiring property (raw cash down), lots of people are priced out of the market (especially major urban areas like Lagos, Abuja, etc), so cannot even benefit from owning an asset that usually appreciates over time and I believe would rather have a property bought on credit as an investment that can still be cashed in than to wait for a large part of their lives (if lucky) before being able to lay their hands on some piece of property that would properly be classed as a slum in the developed world. |
| Re: What Drives Real Estate Valuation In Nigeria? by spyder880(m): 5:18am On Oct 20, 2013 |
Just to chip in something, will the property tax not add to the inflation of rents and even cost of lands as landlords hike prices to cover for what they remit to the government purse? This is an important discussion. All we are saying! GIVE US FRONT PAGE! We go carry placards o  |
| Re: What Drives Real Estate Valuation In Nigeria? by bugmenot: 6:18am On Oct 20, 2013 |
spyder880: Just to chip in something, will the property tax not add to the inflation of rents and even cost of lands as landlords hike prices to cover for what they remit to the government purse? This is an important discussion. Very interesting question, Oga spyder. In the US, rents are mostly driven by market forces, demand and supply. If for example you tried to rent out a property in winter, there is likely to be less demand. Of course, there are lots of other factors that come into play such as location. I stand to be corrected on this, but it is not uncommon to see cases where rent on a property is barely able to pay the monthly mortgage + tax on the property. The real gain is in the equity the owner builds on the property IFF property values hold up. If values go down on the other hand, you could live in a house for 5 years, sell the house (at a loss) and still owe money on the mortgage. If this is possible in Nigeria, I'd like to know where. One of the big challenges property owners faced during the mortgage crisis was - if you owed so much on your property that it was more than the value of your property and a similar property in the same area, why not just buy the cheaper property and abandon yours. In fact, in the wake of the mortgage crisis, I lived in an apartment whose rent went down by as much as $3 to 400 monthly. Lots of properties were being foreclosed on and put on the market for rent or sale. The buyers and renters became king. :-) I'd like to get an economist's opinion on this but maybe the Nigerian market is undergoing a phase where prices rise constantly. Any chances this bubble might burst sometime? :-) |
| Re: What Drives Real Estate Valuation In Nigeria? by Cyberknight: 6:57am On Oct 20, 2013 |
bugmenot: Points noted, but how is this a disadvantage? As previously stated, in my opinion the fluidity of property markets in countries where financing is available is no disadvantage, it is a corollary of the fact that property is a mass market asset, which it is not in Nigeria. Prices can easily go up, and owners make money, or down and owners lose. That's business. In the UK, buyers pay less on their mortgages when they are living in the houses themselves (which is why many lie to lending institutions that its personal residential property, get more favourable terms, then turn round to rent them out). So at least, in theory, if one were buying a house on a mortgage the money you'd otherwise have paid in rent now forms your mortgage equity which you could even recover if the value of your flat or house remains stable or appreciates. This is as opposed to the sums of up to 700k that I've paid as rent for my Lagos flat over the years which, from an economic point of view, are lost to me as they were a expense, not an investment. I strongly believe that if property financing were widely available at reasonable terms in Nigeria (not the stupid double - digit interest rates and even more stupidly short repayment periods that many developers advertise), then the Nigerian property market would become just as fluid as those in countries where cheap financing is already available, as many more people move into the market to buy and sell and speculate. And also valuations would drop - no more ridiculous prices of 1 billion for pieces of woeful real estate in Ikoyi, Victoria Island or Maitama that any London borough would be ashamed to admit as being under its jurisdiction or 30 million for malarial swamps in Lekki. |
| Re: What Drives Real Estate Valuation In Nigeria? by bugmenot: 12:16pm On Oct 20, 2013 |
@Cybernight I've not said there's a disadvantage in property ownership in the US or UK. All I'm saying is that one needs to be careful so the properties don't turn to liabilities. This is a rarity in Nigeria. Of course there are lots of other issues one has to navigate through in Naija e.g. Property fraud. Making credit available to Nigerians at reasonable rates is key to helping people purchase properties. And I think the government needs to be more responsible and wade in here. I'm optimistic that we will get there someday, but you can't blame banks which are mostly private institutions for treading carefully as fraud is rampant in Nigeria. Nowadays people are able to finance personal cars, this wasn't the case in the past, so we shall get there by God's grace. Expecting valuation to drop I think is wishful thinking, at least for some time to come. But I hope I'm wrong on that. With financing available, people are willing to spend much more, they will think about how to make payments later. |
| Re: What Drives Real Estate Valuation In Nigeria? by Cyberknight: 1:42pm On Oct 20, 2013 |
Mr Bugmenot, I understand your point that an asset bought outright is less likely to give problems than one bought with credit. That is inherent in the nature of the credit system itself. However, my contention is that there is no place for such a comparison because the advantage in itself of having a credit system in place for the purchase of major assets far outweighs any disadvantages of the system and CANNOT in any way be compared to what obtains in the absence of a credit system. Most people given the option of owning an asset on to be paid over time or possibly NOT owning one at all (or late in life, or not what you'd want to own given a choice) would take the former option. From reading your posts, I get the impression that you disapprove of the use of the way many people abuse the credit system in developed countries, usually by taking on excessive liabilities and especially w.r.t the financing of property purchases. Naturally, when credit is available, people who have no self-control or proper judgment shall most definitely fall prey to the lure of buy now and pay later. That is human nature. But the fact that there are so many apparent victims of the mortgage crisis does not mean that the system of mortgage financing itself is inherently defective. I do agree with you that valuations are not likely to drop anytime soon in Nigeria. I also agree that the banks are not necessarily to blame for the absence of credit facilities for property acquisition in Nigeria; its a structural failure for which the government or what passes for it bears 100% of the blame. For a credit system to work, there must be a functioning judicial system to make it easy for lenders to recover their money, an easily consultable and modern land register where property transactions can be recorded and accessed and finally (but most importantly) lower interest rates. |
| Re: What Drives Real Estate Valuation In Nigeria? by kopell: 1:48pm On Oct 20, 2013 |
@Bugmenot to be honest you're fair with your argument of rent and mortgage, but I disagree with your point. At my opening argument I said properties are one of the most profitable investment for middle income people in the west. You lay down your point but you forget to mention the tax advantage of owning a property. First foremost you are looking at it as an investment, but you have to understand it is also a home where you and your family lay your head every night. Second, it is a shelter which is a right for human endeavor. In US if your endings is up to $70,000 a year it doesn't make any sense in my opinion to rent, mind you renting or buying you still need somewhere to live. In most case the different between rent and buy does not make that much in terms of prices in some location. With my understanding in some isolating locations you may still not be able to afford a home with that income, I do understand that a lot of income in other part of the country may not be as much as that. Here in NYC even with that in income you will need a big down payment to get and descent property in good section of the City. In Nigeria it is very unfortunate for a piece of land in some locations to cost as much as 30 Million Naira (men I hope you guys can convert this to see how much it is in U.S dollars, that's $192,000). With that amount you can use it has a down payment for a 3 family home of 2 bedroom each, that will fetch you an income of an average of $1,800 a month for each of the apartment. Your mortgage will be more than $2,500 a month and mind you, you do not have to take a 30 years mortgage as you mentioned that it will put you in debt for your whole life. A 15 years mortgage could only be about $200 difference from the same amount on the principle payment monthly. Talking of property tax, your property tax should not be more than $8,000 a year depending on the location. You are also building equity on the same property, now you do that math this is just 30 million naira talk less of those homes that cost over 100 million in Nigeria. I will not buy your argument that's saying government does not provide infrastructure for that citizens should not pay property taxes. I think we can only make changes to this situation if we voted the right people in the government and hold them accountable. It is just because there are federal Universities and state colleges. Can't we just, make changes to our present federal system? and make our college our colleges and Universities more competitive or even transfer them to party sectors and manage them efficiently with a sound education system. Mostly one can see that most of the institution that is run by the government were the ones that was never efficient. In my opinion I think everything in Nigeria should be privatized except security which should be run by the government. Were you aware of the federal law that stipulate rent at 30% of household income, so I believe the same formula is used for obtaining a mortgage (I maybe wrong please correct me). If you look at a home as an investment, I think it will be best for you to look into commercial properties. I can understand locations matters but with those ridiculous prices in Nigerian market if one has those cash here, just for an example if you have 400 million in cash that's about 2.56 Million dollars you can buy a commercial 40 story building in downtown Detroit Michigan that an earn you over 800 thousand dollars rent a year. In conclusion with my argument has far as Nigeria does not have a strong institution that could deal with corruptions sentiments will not stop. @cyberknight I think I will have to agree with some of your arguments because you have experienced both system. Thank you all. |
| Re: What Drives Real Estate Valuation In Nigeria? by ifebosco: 2:20pm On Oct 20, 2013 |
pront page please, this issue is very important |
| Re: What Drives Real Estate Valuation In Nigeria? by MAURI: 4:33pm On Oct 20, 2013 |
Lower interest rates? I don’t think so. Basically in economics, interest rates are tools to compensate inflationary adjustment, stimulate the economy or preventing the economy from overheating. This said, the other day I read that inflation rate in Nigeria had dropped to 8%. That will mean that interest rates must be above 8%. I was recently in Nigeria and I heard my bank manager inquiring about the rate some customer was charged on a loan, it was confirmed at 27% p.a. The Nigerian situation is unique in itself and cannot be compared to what applies in controlled economies. There are a lot of undocumented fees (bribing govt officials, area boys, unstable building material prices etc) that goes into the issue of properties in Nigeria, thereby pushing up the end prices of properties. On the other, the Nigerian property market is less prune to bubbles as against that of the west for the following reasons: 1. Due to unavailability of a stable credit system (This can be seen as either positive or negative) Positive in that, you are only able to own a house in the event that you are financially sound enough for it. Negative, in that only a tiny percentage of the population will have access to the real-estate market thereby shutting out a large percentage of the population. Preventing re-distribution of wealth. The tiny percentage will also be strengthened in the dictation of property prices. 2. In the west where there is a credit system in place, and as the housing bubble in the US has shown (Which is the core cause of the current global financial crisis). There are loads of factors that influence the housing market: multiple intermediaries involved in securing credit, insurances, demand and supply, fraudulent valuation / rating agencies, abililty of other home owners to sustain / maintain the service of their mortgages (Not applicable to the Nigerian situation, since it’s cash and carry), unemployment etc Every situation is different and my opinion is that we need to make our analysis based on prevailing situation in our different locations and our personal plans. I am in a very fortunate situation to own houses in both locations. But honestly, considering the drop in house prices in the west since the start of the mortgage crisis that later became the financial crisis, I am glad I own a tiny property in Lagos and even happier with it’s value appreciation as again the drop in the value of my house here. And I do not have a choice other than to keep servicing my mortgage, while the value of the property keeps dropping. Very interesting topic of discussion guys, keep it coming. I actually think oga Bugmenot has summed it up perfectly: In all honesty, each system has its own advantage. We just need to take the best advantage of the system in which we find ourselves. |
| Re: What Drives Real Estate Valuation In Nigeria? by bugmenot: 5:27pm On Oct 20, 2013 |
@Cyberknight Remember the reason Underdogg started this thread - he sought answers to the increased valuation of properties in Nigeria despite the disorganized nature of the environment. @Kopell kopell: This probably makes sense more often than not. A few things to bear in mind when making these mortgage backed purchases: 1. It is recommended that you buy a property that costs no more than 3 x your annula income. So in your example, you'd have a cap of $210,000. 2. Ideally you should have 20% of the value of the property you wish to buy as downpayment - that's > $40k in your example. These are often ignored. Most purchases are driven more by emotions, as a result many cook the books to buy what they can't afford. I don't know if this is still obtainable, but if you do the math and realise you can't really afford the property you desire, you could choose not to disclose your income and just acknowledge that you can cope with the mortgage payments! The one great thing the governemt did was to make it possible for first time home buyers to buy properties with 3% downpayment only. The one thing I agree hook line and sinker with is that a place that shelters you and your family is priceless. But not many people are able to stop comparing what they owe on their property with the current value. You know what? If they put down the recommended 20% originally, the probability of the two values being close would be much lower. The general notion is that buying is almost always better than renting, I also believed this until recently. Watch the Khan academy video linked below and let me know what you think. Surprising as this sounds, depending on your situation you could be better off renting! https://www.khanacademy.org/economics-finance-domain/core-finance/housing/renting-v-buying/v/renting-vs--buying-a-home kopell: I know someone who owns a million dollar 5-bed, 5-bath home in MA, he paid $17k in property taxes last year. Of course the neighborhood has top notch schools. But I find that people become disgruntled when they no longer have school age kids. And the N30m plots of land in Naija are in really high brow areas. I know places where you can still get land for N800k with reasonable proximity to lag. And if you want shovel ready locations, I know places where you can get a plot of land for a couple of millions (between 1m and 5m). I'm enjoying this discourse very much, but let's not forget that the main topic remains about real estate valuation in Nigeria despite the fact that the government does not do much to make properties affordable. |
| Re: What Drives Real Estate Valuation In Nigeria? by Cyberknight: 7:36pm On Oct 20, 2013 |
bugmenot: @Cyberknight Well said indeed, Mr. Bugmenot. Yes, the reason Underdogg started this thread was his obvious disgust at the high property prices in [Lagos] Nigeria, and we should not lose sight of that. But you came in with the contention that despite high property prices, outright purchases in Naija are better than stepwise ones on credit in the US and the UK due to reasons associated with tax and mortgages and we deviated from the original line of thought to debate your assertion. As you stated, there are indeed locations in Lagos where middle income earners can afford to purchase land at sub 1 million prices, the Ikorodus, Agbaras and interior Ajahs come to mind in this respect. And as we all know, investment in the outer fringes of expanding metropolises like Lagos is a good thing - because of the pressure of population, at least in the near future asset prices are set to go upwards, not downwards. Now in most major metropolises worldwide, upscale districts usually cost an arm and a leg and some other parts thrown in. Thats a given. I don't know what Manhattan prices are like, but I do know that Central London or Mayfair prices are enough to send several of an average man's generations back to the village for a long time. The problem with property prices whether in upscale districts or just reasonably middling areas in Nigeria's major towns (colloquially known as "highbrow" in distorted Nigerian English) is that while an average Englishman (the archtpyical man on the Clapham bus) doddering away with a civil service job or doing something perfunctory in some company with a middling income would steer well clear of Mayfair for example, leaving it to the rock stars and investment bankers, but could dream of buying in maybe Hillingdon (shall we say Ikeja GRA), property prices in Lagos for example, are way out of proportion to average incomes earned, so that only high income earners can even conceive of buying. Property prices of course vary widely, but if one wanted a 3 bedroom house in say Surulere, Maryland, Gbagada, Anthony Village or Ikeja, one should be ready to part with about 25 million (of course this is a rough average, I've seen places go for less and others go for much more). How much are starting salaries in say the banks, or the only industrials left in Nigeria like PZ, Nestle, etc? With that in mind, having paid Lagos rents, maybe school fees for 1 or 2 children as I am doing and reasonable living expenses with no real frills (I haven't taken a holiday since I had my first child, for example), etc, etc, how much do you have left from your income at the end of the year to enable you to afford to start saving towards 25 m? I earn a reasonably decent income in Nigeria but am priced out of the market. As a matter of fact, with what I earn I could be buying a flat on a long mortgage in the UK right now. Solutions: I don't think there are any. Possibly making financing available would give more people the opportunity to play the market and perhaps when many people have property and many are forced to dispose of it at firesale prices or otherwise dump it due to credit problems this might push prices down. Maybe. |
| Re: What Drives Real Estate Valuation In Nigeria? by bugmenot: 8:26pm On Oct 20, 2013 |
Cyberknight: I don't know if this will work for you from a proximity standpoint but I think you can find properties, bungalows, in the Mowe area for between 10 and 15m. My advice is buy what you can - house or land - as soon as you can because I don't see prices coming down. Neither do I see the government putting their act together with respect to financing any time soon. I pray I'm totally wrong on this though. A number of my friends have been able to buy properties through co-operative societies at their places of work. Put down one block at a time and it will surprise you what you can achieve. Best of luck, my brother. |
| Re: What Drives Real Estate Valuation In Nigeria? by orgasticdance: 8:45pm On Oct 20, 2013 |
Underdogg:At the risk of oversimplifying things i'll offer that a situatin whereby 170m+ citizens only have three or four model city/states in the country( ABJ LAG and PH etc) clearly shows that demand outstrips supply of the kinds of quality locations people desire. If 18 out of our 36 states where as relatively urban, industrialized and sophisticated as the aformentioned three, maybe the situation would not have been so dire. As someone else on this thread already pointed out the real estatate market in naija is elitist. I had a good job by naija's standards but with my salary I couldn't dream of owning a decent three bedroom in my lifetime at a decent location where i work and have my kids attend school in the same area. You also can't look at the real estate problem in naija in isolation to other factors like transportation network, city planning and architecture. If there was a reliable railway grid between Niger and abuja or abuja and kaduna , I could buy a home in suleja and spend 30 to 45 minutes commuting to work by light speed train. A robust transport infrastructure could even out the potential housing shortages that stem from working professionals wanting to concentrate in limited but desirable locations. |
| Re: What Drives Real Estate Valuation In Nigeria? by Cyberknight: 9:03pm On Oct 20, 2013 |
bugmenot: Thanks, mate. Already following your suggestion, but the cooperative at my company are simply not interested in the whole land thingy, so individuals have to peel off and make their own arrangements. Funny enough, I just heard recently that my Old Boys Association from secondary school are doing something along those lines, so I may just dig out the old school tie and go see what's in it for me. Anyway, I've already made up my mind to go solo on the Mowe thing any road, just that the whole point of living on the outskirts of metropolises is lost when there is no public transport to speak of. To follow up on what Mr. Orgiasticdance says, living on the peripherals of a city (as is very possible in the developed world) is only possible with good rail or road links. I simply do not think that driving 4 or 5 hours a day into Central Lagos from Mowe/Ikorodu/Agbara both ways will enhance my life in any way; rather I think that after a few years of doing so I might not see 50. My daily commute in Lagos already gives me blood pressure and I'm just under 40. Memories of trains full of malodorous, chattering or sleeping passengers headed to Dartford or Erith or Dagenham come to mind at this juncture. You know, it is simple things like this that make men emigrate. It's not the economy, per se, but the fact that I have to lug around a jerrycan in my boot, live in a 3 bedroom flat at exorbitant rent with lunatic neighbors or am forced into unpalatable choices that rankles. As an example, I pay 120k a term for my son in school. Throughout the 17 years I spent in [public] primary school, [public] secondary school and [public] university, my father did NOT expend up to a total of 120k on my school fees. I digress here, but the frustration with Naija does seep out sometimes.... |
| Re: What Drives Real Estate Valuation In Nigeria? by kopell: 11:00pm On Oct 20, 2013 |
@Cyberknight My brother I fell your pain, @Bugmenot me and you can stay here all day all night trying to prove each other wrong or right but the reality of situation in our beloved country is what @Cyberknight has just explained. We are at the other side of the world earning dollars, that's why we can be talking about property of 15 to 20 million. In reality like the brother just explained, how many of them with an average honest income that can afford those amounts in Nigeria of today? Like the brother just explained school fee for one child is costing him 120k per term, can you imagine if he has 3 kids and he stills has to pay rents. How can he afford to buy a property of 15 Million in situations like that? |
| Re: What Drives Real Estate Valuation In Nigeria? by bugmenot: 11:50pm On Oct 20, 2013 |
@Kopell Na true you talk, my brother. I know this is easier said than done, but what can one do apart from making the best of the situation they find themselves and believing God for a better tomorrow? |
| Re: What Drives Real Estate Valuation In Nigeria? by kopell: 12:45am On Oct 21, 2013 |
Thank you, in conclusion me and you agree on that ONE, believing God for a better tomorrow Ameen. We all should start thinking of going back to change things for better generations of Nigerian's to come. God bless our beloved country. |
| Re: What Drives Real Estate Valuation In Nigeria? by bugmenot: 1:47am On Oct 21, 2013 |
A big AMEN to that! |
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