State of the Nigerian Real Estate Market

For our inaugural op-ed in Highbrow Living, we want to tackle the #1 question on every reader’s mind – what’s the status of Nigeria’s property market? Economic downturn. Covid-19. #EndSars. Devaluation. How does uncertainty affect the market? Right time to buy a new home or wait? Safe place to invest your money? Let’s dig in.

First, separate the home buyers from investors.

Working in D.C. in 2006, my then Jewish boss and mentor explained how Jews view home ownership. He explained that to Jews, a home is not an investment. Its a roof over your family’s head and safe shelter in dire times (Goggle Ann Frank). Sure, we all want our homes to increase in value. But when all hell breaks loose. Our family’s health and safety is the most valuable investment.

So, if one is a home buyer, what’s the current trend in the market? Should you buy now or wait?

5 years ago, a luxury 3bedroom apartment in lkoyi, Lagos was approx. N 240M and in Ikeja GRA it was approx. N65m. Ikoyi prices now average approx. N300M and those in Ikeja average approx. N110M. As a reminder, this 5-year period also included an economic downturn. If you’re in the market to buy a home for you and your family, and you desire to spend less money, not more, the above will guide your decision.

Now you’re a real estate investor and you’re pondering the same question. Well, the #1 rule in investing is: don’t lose money (same goes forthe 2nd and 3rd rules by the way). So, if you invest in property, will you lose money?

The above scenario is a snapshot of residential property performance on nominal, non-opportunity cost basis. Let’s compare this to inflation and other asset classes. According to CBN, average Nigerian inflation over the previous 5 years was 12,76%. Compared to the stock market, the Nigerian Stock Exchange averaged -2.73% over the same period. What about bonds? Boosted by high returns in 2016-2019, 12-month T-bills averaged 11.9% over the same 5-year period. Using the above noted price spread of Lagos property over the same period, property appreciation averaged 25%-69%, depending on sub-market. Real estate outperformed other asset classes. How do we represent these figures in graphttabularforn-r?

Sure, I’m a real estate developer, I’ll always promote property. Not true. As

noted above, in 2019 annual 12-month T-bills returns averaged 12.2%: which gave property a run for its money (literally). In April 2019, I spoke at Sankore Investments’ Real Estate Investment Seminar and I noted this. I also noted that this phenomenon was an anomaly and was not sustainable (I still remember the stares I got). Fast forward a year, and as predicted, the market has corrected.

In conclusion, the popular Chinese proverb reads: The best time to plant a tree was 20 years ago. The second best time is now In context, this means that if you want success and growth in the future, the best time to act is now. When will you plant your real estate tree?