Skip to main content

Recession Looms in Real Estate Sector


Figures released by the Financial Derivatives Company Limited, a diversified financial services institution, recently, show that the sleeping Ikoyi, and Victoria Island real estate sector is not likely to stir from the doldrums any time soon.
Financial analysis describes the real estate market in Ikoyi and Victoria Island as a bad deal for investors at this point in time. The market for residential real estate is worse hit in these areas because of property promoters’ high asking price and an increase in the supply of residential accommodation on the Lekki/Ajah corridor, according to the Financial Derivatives Company’s survey report.
“Residential Real Estate is suffering and crying; high vacancy factor is experienced in the residential segment compared with the commercial segment, said the Chief Executive Officer of Financial Derivatives Company Limited, B.J. Rewane, who presented the findings of the company’s survey at the ‘Monthly Economic News and Views’ at Lagos Business School Executive Breakfast Meeting, recently.
Rewane also said high interest rate would continue to take its toll on the market, noting that shopping malls had the lowest vacancy factor in the sector and that adopted real estate was converting back to pure office blocks.
On the supply side, he said the boom in real estate market led to excess capacity, especially in prime areas like Ikoyi and Victoria Island, adding that home prices climbed above equilibrium levels.
The economic downturn, he said led to excess capacity and shrinkage in supply growth, increased downward pressure on prices and that the opening of the Lekki expressway increased supply and location pressure. “The supply side was also affected by bank foreclosures and fire sale.”
According to Rewane, current demand in the real estate market was significantly lower than in its pre-crisis position, adding that a “lull in business activities reduced demand for real estate; market sentiments suggest properties are still overvalued and higher cost of capital is affecting demand.”
For instance, statistics of Financial Derivatives Company’s survey of five streets in Victoria Island; Karimu Kotun, Elsie Femi-Pearse, Idejo, Kofo Abayomi and Akin-Olugbade show that there is 12.2 percent vacancy factor in all of the 159 houses in these streets; the 111 flats there have 43.25 percent vacancy factor, that of commercial real estate is 10.25 percent while the average residential vacancy factor is put at 21.22 percent.
In Ikoyi, a survey of five streets; Cooper, Probyn, Cameron, Glover, Lugard and Raymond Njoku shows a total of 295 houses with vacancy factor of 7 percent, 390 flats with 37 percent vacancy factor, that of commercial real estate is 10.5 percent while average residential vacancy factor is 19.42 percent.
Regardless, Rewane said the Asset Management Company of Nigeria’s (AMCON) holding period of two years has helped the market.

Comments

Post a Comment

Popular posts from this blog

Common Mistakes Of New Real Estate Investors

Many people are convinced about the soundness of real estate investment as a wealth-building vehicle but most are not clear as to the path to follow and the pitfalls to avoid. More recently, I have had reason to clarify to aspiring real estate investors that real estate investment is not a get-rich-quick system. It is a system that requires knowledge, dedication and focus. We shall examine a few mistakes to avoid if you desire to effectively utilise this wealth building vehicle. One of the basic errors new real estate investors make is to buy properties blindly on the assumption that all real estate investments automatically go up. This common assumption is not true in its entirety. For instance, if you decide to buy a property in an odd part of town without considering basic infrastructures or basic advantages, and then you go ahead and develop the property, you may experience a high vacancy ratio (this means, it takes an unduly long time to rent the property to tenants) or it m...
Post a Comment
Read more

UPDC’s REIT Floats N30 billion Offering

UPDC Real Estate Investment Trust (REIT) has completed arrangements to raise N30 billion by way of offering of 3,000,000,000 units of N10 each at par. The REIT, is sponsored by UACN Property Development Company Plc. The floating of the offer, which is to commence on February 19 20123 was preceded by a completion board meeting held in Lagos on Tuesday, where the bank and all the financial advisers to the offer signed the necessary documents. The Chairman UPDC Plc, Larry Ephraim Ettah  said the offer which closes on March 28, 2013 is payable in full on application. He explained that the REIT is a closed ended one, adding that the units of the REIT  would be traded only through a licensed stockbroker once the offer is concluded. Ettah, while fielding questions from journalists explained that the company has huge projects waiting for execution, adding that the proceeds from the offer would be channeled on the projects. According to him, the REIT will invest primarily in a ...
Post a Comment
Read more

Nigerian anti-gay law prompts arrests, international condemnation

A draconian anti-gay law passed by the Nigerian parliament last year and quietly signed by President Goodluck Jonathan this month has led to the arrest of scores of homosexuals and set off an international wave of condemnation. The Same Sex Marriage Prohibition Act criminalizes gay marriage and civil unions, imposing punishment of up to 14 years in prison for gay couples who openly display their relationship in a country where, according to polls, 98% of society shuns homosexuality as deviant behavior. "This is a law that is in line with the people's cultural and religious inclination," Jonathan's spokesman, Reuben Abati, was quoted by the Associated Press as saying. "It is a law that is a reflection of the beliefs and orientation of Nigerian people.... Nigerians are pleased with it."
Post a Comment
Read more