This article is written by Taiwo Oluwafemi, CEO of PNG Interactive Solutions and owner of the Nigerian property portal www.propertiesng.com.
State Of The Market
Unlike many other markets, Nigeria has experienced a 150 percent rise in property prices despite the global credit crunch and the Nigerian stock exchange meltdown.
According to businessdayonline.com, property prices are actually increasing despite analysts’ expectations that property prices will come down in response to falling share prices.
From a global perspective, Nigeria is the least likely to be affected by the credit crunch because of the magnitude of the housing stock deficit and the fact that credit underwriting is still very low. Nigeria, which is Africa's most populous country, lacks some 17 million housing units and new housing is urgently needed to meet the needs of a growing and aspiring population. Despite a robust economy, access to finance for property developers and home buyers remains extremely limited.
There have been high levels of construction during the past few years in Lagos and Abuja, and the supply of expatriate housing has greatly increased. Mobile phone companies are investing, creating temporary demand. Nigeria’s natural gas potential is also being opened up, bringing in foreign experts. Increasingly, wealthy overseas Nigerians are repatriating money to buy properties back home.
The profitability of housing is drawing many developers into a construction boom. For instance, every plot has been sold at Banana Island, a new development on reclaimed land near Ikoyi, Lagos. According to globalpropertyguide.com, Lagos has some of the most highly priced real estate in Africa, at around US$10,000 to US$120,000 per square metre.
The recent increase in housing supply has squeezed rents, while prices are holding their ground. Rental yields for apartments in Ikoyi and Victoria Island in Lagos are around 3 to 5.3 percent. Yields are generally higher in Abuja than in Lagos, due to less supply, at 6 to 8 percent. Beach estates have rental yields that range from 7 to 8 percent.
Nigeria allows any company or non-resident to buy land rights for a maximum of 99 years for the purpose of their activity, as long as the purchase is declared to the government beforehand.
The Nigerian government has a role to play in making sure that its people are decently housed, but it is the private sector that will ultimately bring about greater ownership through affordable financing schemes. These finance schemes are at their pilot stages as the majority of the banks are providing loans to the middle class to purchase their dream homes. Nigeria is aiming to become one of the world's largest economies by the end of the next decade. Ongoing reform and an inflow of foreign direct investment are taking it there.
The number of real estate transactions is high. Castles Weekly Magazine, a clear leader in the real estate print media business, says advertisers have increased from 200 agents to 500, and each previous advertiser increased the number of properties listed from an average of five to eight. The prices of these properties have followed the same trend as property prices went up 150 percent.
Internet usage in Nigeria is growing. According to Internet World statistics from June 2008, Nigeria has the largest population of Internet users in the Middle East and Africa, with a user base of 10 million Nigerians - 16.9 percent of the total African population. This is a 100 percent increase from Nigeria’s 5 million users in 2006.
The process of advertising real estate online is at an early stage in Nigeria. There is a huge potential for growth with the way real estate is advertised online, especially with the total reliance and dependence by most estate agents on the use of print media to market their properties and listings. The cost of marketing properties in print media is relatively high.
There are several large nationwide estate agents (Jide Taiwo and Co., Diya Fatimilehin, Dipo Fakorede, Ubosi Eleh and Co., Paul Osaji and Co., ARM Properties, to name a few), but overall the market is fragmented. Small and very local estate agents are very important in the industry. These players form the vast majority, with the big names recognised nationwide. The exceptions to this rule are banks and mortgage institutions/building societies, many of whom also operate as estate agents.
Property advertising in Nigeria is dominated by print media company Castles Weekly Magazine, which covers four major cities in the country (Lagos, Abuja, Port Harcourt and Ibadan). The company also runs the portal castlesweekly.com. They are the clear leader overall in real estate advertising in terms of usage, readership and number of listings.
The second major portal is ip4properties.com, a property portal that has been a key player since 2005. Their business model focuses only on the website, and they lead in terms of usage. The majority of estate agents list their businesses in the directory, but only a small number of properties are listed on the website.
The third contender is propertyinnigeria.com, a website being run and managed by Nigerians in the UK and USA with an office in Nigeria. There are also a few smaller portals such as propertiesng.com, naijaproperties.com, and nethomesng.com, run by various web solution companies.
The most notable feature of the Nigerian market is the fact that estate agents advertise and list their properties in the classifieds sections of traditional newspapers, dailies and bulletins. As in Europe, there is a combination of print and online property advertising business models, but the print advertising worldwide is deteriorating as most publishers are closing down their print operations and focusing solely on online advertising.
Other Facts about The Nigerian Market
- Generally, all property sellers go through an agent to sell their property.
- There is no background check or data on history of a property.
- Agent listings are average to poor quality, meaning their advertisements often lack photos and descriptions of the properties listed.
- The market is only slowly opening its eyes to the new technical possibilities of property portal platforms.