Hello! I am Roland Igbinoba. I am here because I love to provide useful insight in real estate. You can find me

Transcription

1 Hello! I am Roland Igbinoba I am here because I love to provide useful insight in real estate. You can find me rigbinoba@pisonhousing.com

2 Luxury Residential Sub-Sector: Property prices vs. economic realities

3 Walking down the streets of Lagos A number of luxury residential properties have sprung in Nigeria s major cities with beautiful landscapes and an evolving culture of modern architecture in building design. NEW DEVELOPMENTS IN HIGH END LUXURY RESIDENCE Seattle Courts in Victoria Island World Trade Center, Abuja No. 4 Bourdillon, Ikoyi Lorenzo, Ikoyi Rainbow Town, Port Harcourt The Mandarin, Victoria Island NEW PROJECTS IN EARLY DEVELOPMENT PHASE Eko Energy Estate LeReve Tower Azuri Peninsula Lagos Sky Tower Eko Pearl Towers The One, Eko Atlantic

4 Most of these high end luxury homes are graced with tower structures and have average price points of $1m per apartment and more. These tall buildings are located within business districts and are mostly intended for mixed use both residential and commercial purpose.

5 World Trade Center, Abuja

6 Seattle Court, Victoria Island, Lagos

7 Lorenzo, Ikoyi, Lagos

8 Atlantic Resort, Victoria Island, Lagos

9 Other luxury homes can be found in estates and the quite suburbs

10 A Luxury Residence in Ikoyi, Lagos

11 New developments across Lagos, Abuja and Port Harcourt have witnessed increased investment from both international and local investors. Many high end luxury projects are still in the early development stages.

12 THREE REASONS WHY LUXURY HOMES ARE FAST RISING Increased number of high net worth individuals(hnwi) Changing investment climate Favourable demographics

13 HOW EXACTLY? High Networth Individuals A 2015 report by New World Wealth shows the number of Nigeria s high networth individuals(persons with net assets valued at more than USD1MILLION) is an average of 15,400 persons and Lagos is home to 61% of this figure. Increase in income levels means higher purchasing power for people with interest in real estate. Changing investment climate A break down of Africa s HNWIs financial assets shows that 23.3% of assets were held in real estate compared to cash & cash equivalents, 22.7%, fixed income, 19.6%, equities, 19.1% and alternative investments, 15.4% according to World Wealth Report Favourable demographics Nigeria s young population has an affinity for the finer things in life. In the retail segment, preference for quality and convenience had played a critical role in converting regular shoppers in traditional markets to loyal customers in modern shopping malls. We see the same trend taking turns in luxury residential properties.

14 A typical luxury home sells for amounts from N80,000,000 to N1,300,000,000 in Lagos while in Abuja the range is from N75,000,000 to N1,400,000,000. Condominiums sell for much lower prices between N20M and N60M. Penthouse apartments sell for prices between $1M and $3M and are not usually placed for rent.

15 Luxury residential properties are more concentrated in Ikoyi, Victoria Island, Ikeja GRA in Lagos and Maitama, Asokoro, Gwarinpa, Jabi in Abuja then any other city in Nigeria. Detached duplex, terrace duplex, semi-detached duplex and apartments are the most popular house structures in the luxury residential market. LUXURY DENSITY

16 Comparison of Average Sale Prices Between Lagos & Abuja as at January 2016 LAGOS ABUJA Terraced Houses 133,529, ,250,000 Detached Houses 228,999, ,370,787 Semi Detached House 171,440, ,000,000 Condominiums or Apartments 96,583, ,380,000

17 Consumer preferences for luxury

18 We asked 86 high networth individuals what type of luxury property they usually look for? Apartment/ Condominium Detached House Semidetached House Terrached House Entrepreneurs Private salary earners Government salary earners TOTAL

19 Most luxury buyers have a strong preference for privacy choosing to buy either an apartment or a detached house.

20 Do they prefer to rent or buy a luxury home and why? Are you considering a luxury home purchase or rent? 4.1% Buying motivation 12.2% 34.1% 95.9% 53.7% Prefer to rent Prefer to buy Recent career or business success As an investment Other

21 Most important features buyers consider when searching for a luxury home Jacuzzi 13% Other 4% Fully Serviced 21% Swimming Pool 19% Furnishing 20% Parking Space 23%

22 And how much are they willing to pay to own one? Other 18% Above N500M 4% N201-N301M 6% N100M at most 54% N100M-N200M 18%

23 Are they willing to go beyond their budget? 24% Not at all 6% 70% Yes, but only 10% - 25% more Yes, but only 5% or 10% more

24 Top desired districts in Lagos Lekki Ikoyi Ikeja Ajah Victoria Island Most Coveted Locations for Luxury Home Buyers in Lagos

25 Top challenges buyers face when searching for a luxury home Top challenges are related to: Cost of acquiring one Quality of luxury homes supplied Availability of information Environmental issues

26 What buyers are saying to luxury real estate developers Transparency and educating the public /buyers Reasonable cost offer flexible,no or lower interest rate, longer term payment plans especially for less experienced or first time owners Focus on the environment too Proximity to various facilities (entertainment/restaurants/house of worship, etc.) Have ample space and good infrastructure Better quality of fittings and finishing

27 ECONOMIC REALITIES

28 The State of the Economy The financial crisis fuelled by low oil price is a cause for concern in Nigeria. Companies have laid off thousands, cut production and even shut down operations as they struggle to get enough dollars to pay for imported raw materials. The Naira had devalued following a slump in oil revenues, the country s lifeblood. The Central Bank adopted conservative measures in preserving the naira. Dollar supply has been cut and a circular on forex limitations issued to businesses importing a range of items. Cautious spending on the part of consumers and slowed projects by investors have siezed the nation.

29 Confidence rose in Kenya and Ghana, but declined in Nigeria According to Nielsen s Global consumer confidence report Q3, 2015 consumer confidence increased five index points in Kenya (117) and five points in Ghana (99) in the third quarter. Conversely, confidence decreased five points in Nigeria (127), the second consecutive quarter of declines. The confidence score in Nigeria, while still overwhelmingly positive, is likely a reflection of the more recent moderate economic outlook driven by currency devaluation, rising oil prices, food inflation, and dwindling consumer disposable income.

30 Consumer confidence scores GHANA Q Q Q Q Q KENYA Q Q Q Q Q NIGERIA Q Q Q Q Q3 2015

31 POOR SPENDING AND JOB OUTLOOK IN NIGERIA The outlook for jobs increased in Ghana and Kenya, rising three and two percentage points, respectively, from the second quarter. Likewise, sentiment for personal finances and immediate spending intentions also increased in both countries. Seventy percent of Kenya respondents and 67% of Ghana respondents believed the state of their personal finances were good or excellent, up three and four percentage points, respectively. Conversely, sentiment for all three indicators declined in Nigeria, with immediate spending intentions declining eight percentage points to 48% in the third quarter.

32 Consumers are more likely to reprioritize where and how they spend money, with a greater focus on basic necessities and saving naira for a rainy day..

33 HOW DOES THIS AFFECT LUXURY HOMES When a country faces economic hardship and a credit crunch, the luxury property market is usually the worst. People simply withdraw from luxury goods and a demand deficit follows. If the trend continues, a price burst may occur in high end luxury markets of Victoria Island, Banana Island, Asokoro, Maitama.

34 Growth Trend:Rent Price Movement for a 3 Bedroom Apartment in Lagos & Abuja 25,000,000 Rent prices crashed dramatically for a 3 bedroom apartment in Banana Island, Maitama and Asokoro. The crash in Lagos is trongly motivated by a naira devaluation, meltdown in business and consumer spending while in Abuja, the property market is tied to government spending from crude oil earnings. Lagos rents had risen following the free fall of naira in the early periods of 2015 before crashing. Asokoro and Maitama were worst hit with prices falling by higher margins than that of Lagos Banana Island. 20,000,000 15,000,000 10,000,000 5,000, % -12.5% -27.7% -13.4% -13.3% -27.5% -15.4% -33.3% -23.9% Q2, 2015 Q3, 2015 Q4, 2015 Jan-Feb, 2016 Banana Island, Ikoyi Asokoro Maitama

35 Has demand for luxury residential homes increased or fallen since the dollar appreciated vis-a-vis the naira? 18% In a survey conducted by Pison Housing, luxury real estate developers had indicated a poor outlook on demand for luxury home. When asked whether demand for luxury homes has increased or fallen in recent economic times, 68% of realtors said that demand has decreased, 18% said no change while 14% said demand went up. 14% 68% It has decreased It has increased No change In a survey conducted by Pison Housing, luxury real estate developers had indicated a poor outlook on demand for luxury home. When asked whether demand for luxury homes has increased or fallen in recent economic times, 68% of realtors said that demand has decreased, 18% said no change while 14% said

36 We also asked buyers how much they are willing to pay for rent? Other 5% 46% of buyers are willing to pay only amounts between N3.5M and N5M to rent a luxury apartment and when asked if they were willing to go over budget, a huge majority, 70% said they wont even give it a second thought. N/A 36% N3.5M-N5M 46% N10M-N15M 2% N7.5-N10M 2% N5M-N7.5M 9%

37 Why has demand for luxury homes decreased? Most developers expressed concern over factors such as exchange rate, purchasing power and economic downturn making luxury home purchase expensive.

38 PROFILE OF LUXURY HOME BUYERS ACCORDING TO REALTORS 89.7% of potential buyers are Nigerians while 10.3% of buyers are foreigners

39 Ocuppation of most buyers 17% 14% 69% Entrepreneurs Government salary earner Private salary earner Most luxury home buyers are self employed

40 If you were to buy a luxury home, what would be your preferred mode of payment? Monthly Installment after initial deposit Mortgage Loan Outright purchase Quarterly installment Entrepreneur Government Salary Earner Private Salary Earner Monthly installments and mortgage appeal to private salary earners more than entrepreneurs who prefer outright payment.

41 There are more first time buyers, 68%, compared to experienced buyers, 32% in Nigeria. Real estate developers need to create flexible payment plans and cost effective house structures to meet demand.

42 REDEFINING LUXURY Demand meets the market

43 We believe we know luxury when we see it Price alone does not distinguish that status. It is location, property entry, architecture, decor, decadent amenities, entertainment capability, lovely grounds and myriad other details that help a home stand out from the ordinary. Land space and its utilization is one of the determinants of the cost of constructing a luxury house, high costs which then reflect in the sale price.

44 Marital Status DEMOGRAPHICS OF POTENTIAL BUYERS IN LAGOS Distribution of Potential Buyers % % % 0 67% of potential buyers are married, 31% is single while 2% is divorced. Monthly Earning Divorced Married Single

45 THE RIGHT LUXURY PROPERTY FOR THE WALLET Apartments appeal more to singles with a need for comfort, beauty and networking with likeminded people of the same class. Apartments Semi-detached houses Semi-detached dwellings often appeal to young couples who are looking for privacy and security in a family home but are unwilling or unable to pay the prices asked on many detached houses. Apartments and semi-detached houses cost significantly lower than detached duplexes.

46 Terrace duplexes are also less expensive but generally do not cater to the need for privacy; a shared parking space, shared swimming pool and garden, is one mess waiting to happen.

47 GETTING IT TOGETHER Developers should focus on apartments and semi-detached houses as an affordable option to luxury. Properties should be close to public amenities. Create longer payment plans with low interest rates for these houses. Buyers are also concerned about the environment Educate buyers on available house structures as well as benefits and costs. Buyers crave more value, cheaper prices and flexible payment plans

48 Thanks! Any questions? You can find me