High end developers drop prices by 20%

A stable supply of choice homes without the commensurate demand in Nigeria’s high end property market is compelling real estate developers in this segment to drop rates by up to 20 percent.

Also, operators in this segment, known for demanding rent in foreign currencies (dollars)  now accept naira from prospective customers, BusinessDay investigations have revealed.

The developers traditionally operate in exclusive neighbourhoods such as Banana Island, Ikoyi and some select sections of Victoria Island, all in Lagos, and Asokoro in Abuja.

The new move, market watchers say, could entice a handful of buyers with the wherewithal but would still not crash the high vacancy rates in highbrow areas until house prices and rents in Nigeria’s most coveted neighbourhoods become  more realistic.

“The liquidity squeeze in the system, coupled with the new exchange rate, is likely to prompt property owners in the high end market to rethink their asking prices,” Stephen Jagun of Jagun Associates, an estate valuing firm, told BusinessDay in an exclusive  interview.

Jagun acknowledged though, that most luxury apartments  in the market are owned by extremely wealthy individuals and politicians, hardly in a rush to rent or sell. He however  pointed out that the recent slump in naira value and high vacancy rates that has plagued these exclusive neighbourhoods in recent time, would likely stir a major rethink.

The naira has suffered a major slide in the past few months, with $1 currently exchanging for around N210 at the Bureau De Change and Parallel market, thereby pushing up rents in exclusive neighbourhoods where rents are paid in dollars by an average of 25 percent short of market prices, pre-devaluation.

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Olumide Olutimeyin, a Lagos-based property vendor, also affirmed to our reporter that the recent appreciation of the dollar against the naira has left developers in the luxury market with little choice but to accept naira rents from customers, because of the high exchange rate.“For instance, three months ago, when the naira was relatively stable, a three bedroom apartment in Banana Island could conveniently go for $100,000 (N16,500,000) per annum but with the exchange rate currently hovering around N210 to $1 dollar, the same apartment will now cost N21,500,000 per annum, and that is simply outrageous,” Olutimeyin said.

According to him, the devaluation of the naira and slow movement in the luxury end of the property market have forced the market to a standstill, with property owners battling to dictate terms and conditions in a market in which they once called the shots, as the dollar continues to soar in value against the naira.

However, further investigations by this reporter revealed that rents in some select prime estates such as Rebecca Court and Ocean Parade in Banana Island, Lagos, have remained unchanged, as clients still pay about $110,000 per annum for two or three years.

“These are landmark estates and they have successfully carved a niche for themselves over time, so they can be immune to the current pressure in the market,” Olutimeyin said. He observed though, that most of the residents were foreigners.

Okechukwu Iwuagwu of O-macconi ventures, a real estate marketing firm, acknowledged the constraint of high-end developers to attract buyers in recent times, pointing out that the decision to accept the local currency was simply a response to market forces.

“The high end segment of the market has continued to move at snail speed in recent times, and devaluation of the naira can only further compound the supply glut and soar vacancy rate, hence, some pressured developers are ready to accept naira and drop prices by 20 percent, once they see a willing buyer,” Iwuagwu said.

According to him, a three bedroom apartment in a private estate in Ikoyi which had been pegged at $85,000 per annum, has been reviewed down to N12 million.

Though analysts have expressed mixed-reactions on the prospect of the property market in 2015, Fola Obabiyi, managing partner, Bosiva Realtors, remains confident that the Abuja property market will rebound once the elections are over.