Expectations are high that rental activity in Nigeria’s property market will be upbeat in 2015 following the recent devaluation of the naira which, analysts say, will compel prospective home buyers to reconsider their intention to buy houses and resort to renting in the New Year.
The analysts explain that this would be house buyers’ immediate reaction to a projected 20 percent hike in house prices by developers as part of measures to cushion the impact of inflation and offset the high cost of imported materials used for housing development.
The New Year is expected to witness property sales at exclusive locations in some cities, as non-conventional homebuyers (returnees) with strong purchasing power would leverage the naira devaluation, which leaves them with more dollars or pounds, to acquire choice properties from distressed property owners.
“The rental market is expected to thrive in 2015 as sales for property looks likely to dim a bit,” a real estate service provider who pleaded anonymity told BusinessDay in an exclusive chat, explaining that the minimal effect of naira’s devaluation on the rental market when compared to sales will, to a large extent, define activities in the market in 2015.
“The major brunt of the devaluation will be on sales as developers will likely raise house prices, but for rentals, it will likely take a longer time considering that rents are paid annually, so changes can hardly be instant,” the service provider said.
John-Bede Anthonio, an executive at John Bede Associates, a real estate consulting firm, also confirmed to BuisnessDay that against earlier expectation of a ‘sleepy’ 2015 for the property market because of the elections, the devaluation of the naira could spark a series of activities in the market.
“There is increasing possibility that more people will ent properties in 2015 especially at the high end market where prices might be too expensive for an outright buy,” Anthonio said.
According to him, the market will also record some sales at the high end after the elections, as most politicians who couldn’t realise their aspirations would look to offload some assets to recoup liquidity.
“There is also expectation that some returnees will be enticed into buying choice properties because of the stronger value of the dollar in comparison to the naira and the stable returns associated with real estate which hovers around 12 percent; so this group of buyers will trigger some sales in the market,” Anthonio added.
Acute housing problems in the major cities of Nigeria like Abuja, Lagos and Port Harcourt, where most of the residents rent rather than buy houses, has created a viable rental market in these cities, with yields averaging 10 percent.
Adetokunbo Ajayi, CEO, Propertygate, in an earlier interview with BusinssDay had predicted a more active rental market in 2015, explaining that any move by developers to increase house prices as a result of naira devaluation may ward-off interest from intending buyers, who will result to renting.
“Though home buying is a necessity, there is also an alternative to it, which is renting; so when people cannot buy they will opt to renting and when you consider the slow response of buyers to properties in recent times it only implies a stronger rental market in 2015,” Ajayi said.
(Culled from http://businessdayonline.com)