Why Abuja property market defies global economic meltdown


The world is facing an economic crisis widely  believed to have been triggered by property related financial institutions in the United States of America. The global economic meltdown which affects virtually every sector of the economy, has shaken property markets in the world’s major cities like New York, Dubai and others to the roots, bringing prices crashing.

For instance, a 5,000-square-foot five-bedroom, five-bath condo with a terrace in Manhattan, USA lost its value by $4 million. The property which was originally priced at $22 million in July last year, is now on the market for $18 million. This represents an 18 percent cut on the original price.
Also, reports indicate that property prices have dropped drastically on the tiny island of Dubai, United Arab Emirate, leading to most Nigerian investors who are seeking ways of deriving maximum benefits from the lower prices of property and the investor-friendly environment of the Gulf property market rushing there.

A number of reports on the state of the real estate market in Dubai   show prices for residential property falling by anything from 20 percent to 50 percent, highlighting the uncertainty surrounding the market.

The continued fall in prices of property is being driven by weakened demand and an almost complete lack of competitive liquidity for end users looking for financing.
Daily Trust investigations, however, revealed that unlike in other countries where the persistent bite of the crisis forced the property market to dwindle, in Abuja, the reverse is the case. The houses have witnessed very sharp increase in prices.
Houses that were sold for N100 million in Maitama and Asokoro districts last year witnessed an increase of about 25 percent. Those that went for N250 million were jerked up by the same percentage or even above.
Also in Jabi, Abuja’s emerging ‘paradise district’, prices of houses have skyrocketed by between 20 and 30 percent.

A property developer, Dare Olukoya, said property prices will continue to jerk up in defiance of the economic meltdown because Nigeria’s economy does not depend entirely on the banking industry.
He said, ‘‘our economy does not depend entirely on banking. Therefore, any investor can wake up in the morning and go to Asokoro, Maitama or any other district to buy a house without requesting any loan from banks. This, I think, is basically why the market does not have control; and the prices go up regularly. In other countries, if one wants to build an estate or a house, one has to go to the bank and borrow money. The bank can regulate the price of the house and the profit he can make. But here in Nigeria, the reverse is the case”.

Olukoya also said the influx of people into the city and lack of infrastructure in the satellite towns have helped increase prices of property and rent.
He stated that this year, house rent is very high due to the FCT Administration’s introduction of some levies on property. For example, a one-bed room  self-contained which attracted a rent of N300,000 is now N400,000 while a two-bedroom flat goes for N900,000; and the prospective tenant is expected to pay for two years in advance.

Also, a self-contained single room in[b] Gwarinpa  [/b]goes for N220,000, while the same property in Zone 6 goes for N250,000 or N200,000; and  a one-bedroom flat goes for N600,000, two-bedrooms for N800,000, and three-bedrooms for N1.2 million.
In[b] Maitama, [/b]self-contained houses are rented at between N350, 000 and N400,000, and a one-bedroom flat goes for N700,000 while a two-bedroom flat is N1.3 million. The same rate obtains in Asokoro.

However, another factor that has led to the rise in prices of property in Abuja is the developer’s quest to maximise profit. A developer, G.S. Sarki, told our reporter that house prices are hiked because government does not provide a platform for real estate development, saying the provision of basic infrastructure by government could subsidize prices.
He said land acquisition had been the most difficult thing in the capital city, adding that even in a case where a developer was able to secure one, the cost of building materials, clearance for building by the Department of Development Control and other charges by the FCT Administration forces developers to hike house prices upon completion.

He added that government should encourage the use of indigenous building materials, saying also that the Land Use Act must be abrogated so that people can have access to land without hitches. 
But a source at the FCDA told our reporter that land charges and other expenses by the authority has not contributed to  property  price hike, saying most developers are greedy in land deals.
He said, ‘‘The FCDA does not collect much from developers. We only collect a token of levy to ensure developers comply with rules and regulations governing land acquisition and management. These developers hike prices in order to get maximum profit’’.

A landlord, Zayyanu Janyau, told Daily Trust that  house rent is high because most tenants don’t comply with agreed  tenancy  rules, thus leaving landlords with no option but to hike the rent.
He also blamed government for introducing unnecessary charges on houses thereby aggravating an already expensive rent situation.
Leading mortgage institutions in Abuja such as Aso Savings and Loans Plc, Union Homes Ltd, First Generation Homes Limited and Abbey Building Society Plc are facilitating the acquisition of houses by individuals and housing estate developers.

For instance, First Generation Homes Limited support has been crucial for EFAB Limited which now provides more than 2, 500 housing units of various price ranges at EFAB Estate in the city.
Mr. Omede Odekina, a Public Relations Officer at Aso Savings and Loans Plc, told Daily Trust that the company has been facilitating home ownership for thousands of salary earners and those engaged in the informal sector.

The daily influx of people from all parts of the country into Abuja, the extensive demolition and eviction carried out in the Federal Capital Territory during the Obasanjo era and the continued relevance of Abuja as a political hub are among the strongest reasons driving the city‘s real estate value upwards.
However, there are clear indications that members of the body are doing well in Abuja‘s thriving real estate market.
Agents of different hues and even scammers have also featured while the speculative prices of land encourages forgery of documents.

Kharis, May, 2009
kashorellng@yahoo.com

Curled from: http://www.dailytrust.com/index.php?option=com_content&task=view&id=5472&Itemid=15