Distress sales by politicians open fresh investment window in property market

The Nigerian property market is seeing a rush of mouth watering high brow offerings, as politicians desperate for campaign funds against next month’s general elections let go their assets in upscale areas in major cities across the country, at knocked down prices.

Close market watchers say that this development, which has opened a fresh investment opportunity in the market, is usually a subtle transaction involving high end properties in choice locations, emphasising that it presents investment opportunities not common in the market.

“Distress property sales take place every time elections are approaching. There are many distress sales around town, but they are closed transactions”, Omochiere Aisagbonhi, the CEO of Omais Homes, confirmed to BusinessDay, adding,  “when politicians run out of cash, they usually sell their properties at reduced prices, to people who have ready cash;  this transaction usually involves high class people and generally,  the buyer has a big say in price determination”.

The market started receiving these distress  sales about two months ago, when politicians were desperate to win their parties’ elections at the primary level, and expectation is high that more of such transactions would happen in the market this month, in preparation for the election proper.

The high end market where these transactions take place, harbour many empty houses which are traced to  politicians who use them as store of wealth to be disposed of at times like this. Highbrow locations like Ikoyi, Banana Island, Osborne Foreshore in Lagos; Asokoro, Garki, Wuse in Abuja, and the Government Reserved Areas in other cities of the country, are havens for these properties.

A private equity investor who pleaded anonymity told  BusinessDay of a transaction involving a politician from the South South region of the country, who sold his property in Asokoro area of Abuja valued at N750 million for N400 million to enable him contest primary election to the Senate.

A property vendor who did not want to be named also told this reporter of a similar transaction in which an aspirant to the House of Representatives, from one of the South West states, sold his house in an estate in Lagos for N250 million, pointing out that the house would, under normal circumstances, go for over N400 million.

“We still expect more of these transactions this January, during the campaign for the election proper”, Yemi Madomidola, a real estate consultant says, disclosing that some of these properties are sometimes sold up to 40 percent below their market value.

Madomidola adds that the opportunity would be more, considering that falling oil prices have impacted negatively on government revenues. He observes that politicians at the state and federal levels might not be getting the kind of benefits they are used to, and so, for them to win, they have to look for money elsewhere.

The low demand at the high end market, where these transactions take place, make the opportunity all the more attractive and in his opinion, those who would be buying now, might pay less because that market is already experiencing over-supply.

He adds that the property market is experiencing a slowdown, as investors and developers cautiously hold back and hope the elections will come and go without untoward incident.

BusinessDay had in an earlier report, observed that activity in the property market had slowed considerably by the last quarter of 2014 on account of  caution over the coming elections.

The report added that the market was also responding to the security situation in the country, which in the past six months, has  been shaky, on account of the Boko Haram insurgency, discouraging local investment, but also threatening and scaring foreign direct investment.

CHUKA UROKO