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An official report coming from the economy watch, Financial Derivatives Company Limited has informed that the number of vacant luxury properties in the upper-class real estate neighbourhoods of Lekki, Victoria Island and Ikoyi, Lagos has risen by 72 percent over the last 18 months.

The Executive Officer of Sujimoto Construction Limited, a Lagos-based real estate development company, Mr Sijibomi Ogundele, who revealed  this said the surge is due to over pricing.
He explained that the cost of construction is usually padded and warned prospective investors to beware.

“This has become a motto on a whole new level for prospective investors, who seek the very much-deserved value for money. To avoid drawing hasty conclusions and to guide our investment choices, investors should only listen to industry experts and verifiable perspectives as seen in the FDC research, and avoid the bandwagon of those listening to jaundiced opinions, which are quite popular.

Mr Ogundele, Sujimoto as he is fondly called, however, said that not all house owners are corrupt.

“To put this more clearly, apartments that should not cost more than 100 million naira, are costing investors 400 million naira to construct. Therefore, owners have no other choice than to let out the apartment at 40 million naira, transferring the padded cost of construction to tenants.

According to him, the case of high price tags on houses should be based on not just quantity but quality.

“A developer who compromises on quality of materials, no matter how highbrow the property’s location, has no right to place an exorbitant price on it. Thus, the argument for demand exceeding supply, as far as empty apartments in Ikoyi go, is unfounded.

“Luxury apartments are in high demand. Poorly finished buildings with exorbitant prices constitute the pile of empty apartments constantly being alluded to. Consider this: Are developments such as Tango Towers and Ultimate Towers in Ikoyi, empty? If such developments are not empty, imagine what would happen when the LorenzoBySujimoto with its high-end features, state-of-the-art facilities, exceptional returns on investment and competitive pricing, is completed?

The Lagos-based developer opinionated that luxury is not expensive, rather it is the intention to deliver luxury that is expensive.

“While the cost of a nice three-bedroom apartment in Johannesburg would go for about $350,000, the same apartment in Ikoyi would want $1 million. If the cost of construction materials is the same all over the world, the price of marble, granite, cement, tiles, kitchen, doors, paints etc, why is cost in Nigeria about 300 percent higher?

“You cannot offer a Toyota for the price of a Bentley. One might argue that both cars will eventually ply the same road but the efficiency and prestige of a Bentley speaks for itself. Luxury sells itself. For us at Sujimoto, our biggest marketers are our clients. Listen, I have sold crap before and I have sold luxury and I can tell you from experience that it is easier to sell luxury than crap.

“When you sell luxury, you sell peace of mind, you have not only sold something that would last for generations, but you win the heart of your client who now becomes your evangelist. With the oil price plummeting, and major economies across the world experiencing downturn, individuals and organisations no longer have loose money to throw around. And with the current downsizing by companies, prospective tenants demand full value for their hard-earned money.

Ogundele insisted that developers in Nigeria must adjust to the current situation and raise the standards of the country’s construction market so as to compete with foreign developers.

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Lawal, who stated this during a courtesy visit to the office of the Acting Deputy British High Commissioner to Nigeria, Mr. Ahmed Bashir, said policies that would quicken the process and make it successful were being put in place.

“Governor Akinwumi Ambode has formulated people-oriented policies that will ensure the supply of 187,000 housing units yearly to address the state’s 2.5 million housing deficit in the next five years,” he stated.

The commissioner said his ministry would model its affordable housing after the British social housing programme.

He said the state intended to explore the vertical style of building in order to make housing units available in the employment centres, especially for the lower and middle income earners.

“We also plan to address the dearth of skilled workers in the building industry such as masons, carpenters, steel fabricators, plumbers, electricians, painter, joiners, tillers and the likes through the Master Craftsman Project,” Lawal said.

According to him, the Master Craftsman Project of the ministry is to encourage the younger generation to embrace skills in construction as the older artisans were gradually ageing without younger people being trained to replace them.

Bashir said the United Kingdom also had passion for training and was ready to assist the ministry in providing same for craftsmen in the state.

He also called for more investment in housing for short stay in the state, especially for businessmen and tourists.

According to him, the Lagos State Government should make adequate provision for the people to come to Lagos and the country in general and stay briefly.

“This will guarantee their safety on their short stay in the country,” he said.

PUNCH.

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The project, which comprises two and three-bedroom flats, is being handled by Meadville Building and Construction Company, and is expected to be completed in the first quarter of 2016.

Speaking at the commencement of the project, the state Controller of the Federal Mortgage Bank of Nigeria, Mrs. Mojisola Gbadebo, explained that the project was being sponsored by the bank in collaboration with the Federal Housing Authority.

According to her, a prospective buyer, who must be a contributor to the NHF, stands the chance of accessing a mortgage loan from the bank at six per cent interest rate and 30 years of repayment, depending on the age and income level.

While advising interested members of the public to key into the NHF, Gbadebo explained that the amount to be repaid monthly by the contributor depended on their income and age, adding that the loan was not exclusively for salary earners but all income earners from the age of 18.

The representative of the Federal Ministry of Works and Housing, Mr. Peter Taiwo, reaffirmed the readiness of the partners on the project to realise the set goals, and gave an assurance that quality building materials would be used to ensure that the buyers would get value for their money.

The Managing Director, Meadville Building and Construction Company, Ademola Benson, said the firm would ensure that the project would be completed in the next few months.

He confirmed that everything needed to deliver the buildings had been provided, declaring that the project would complement the efforts of the Ondo State Government in achieving housing for all.

Benson attributed the cause of the delay to paucity of funds, but noted that all obstacles and challenges hitherto hindering the execution of the project had been surmounted.

PUNCH.

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HMOs, generally rented to young professionals and key workers, are intrinsically geared towards maximising rental income by letting each room on an individual basis, according to the report from Platinum Property Partners.

According to Propertywire.com, research for PPP has shown that compared to capital gains, rental income for all types of BTL is by far the most dependable and stable source of return on investment. The firm says that HMOs landlords are therefore best positioned to absorb the higher mortgage costs caused by an interest rate rise, an event which the Bank of England has indicated will take place in early 2016.

It explained that the profits of a standard buy to let investment can be wiped out by a three per cent rise in interest rates, assuming mortgage rates increase by the same amount, as gross rental income is not sufficient to cope with higher mortgage interest repayments.

Even although HMO landlords pay for all household bills, the fact that the property generates a much higher gross rental income means that these costs are easily absorbed. The analysis suggests that the maximisation of income from a given size of property by creating extra rooms and renting them to multiple tenants means HMOs can generate rental income that is up to four times higher than the rents achieved in a standard buy to property.

Previous analysis carried out by PPP has shown that rental income is a far more stable and dependable source of return than capital gains, dispelling the myth that the success of any buy to let investment is mostly about rising house prices.

From 2010 to 2012, investors operating in both the standard BTL and professional HMO market were sustaining capital losses. It was only in 2013 and 2014 that capital gains began to recover but in contrast, rental income consistently increased throughout the same period for both asset classes, albeit at a much higher rate for HMOs, the report says.

It also points out that the best way that landlords can ensure their investment can cope with an interest rate rise, and any other unexpected costs, is by planning ahead and having a good understanding of the financial performance of their portfolio.
Research carried out by PPP in 2014 showed that a severe lack of research and poor planning is preventing many buy to let investors from maximising their income. A quarter of buy to let investors sought no advice and carried out no research before making their property purchases and a staggering 93 per cent had no five year plan for their investment.

Separate research by PPP shows that landlords are also prone to miscalculating their returns. Some 12 per cent landlords do not take any costs into consideration when calculating the financial performance of their buy to let portfolio. In addition, one in four landlords pay mortgage interest but do not take this into account.

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Roux stated this in an interview with journalists during the Nigerian Institute of Architects /Lafarge Africa Plc 1st Distinguished Lecture Series 2015 delivered by a former Vice President, Dr. Alex Ekwueme, in Abuja on Thursday.

He said that one of the company’s objectives was to help build better cities in Nigeria and that the country had tremendous potential and a large housing deficit of about 18 million units.

He said, “We are currently working hand-in-hand with the government, professionals and businesses to deliver more housing. For example, the Ministry of Lands, Housing and Urban Development has allocated land in Abuja to Lafarge to develop mass affordable housing.

“We have solutions for affordable housing through a partnership with LAPO Microfinance Bank and have impacted close to 2,000 people. We are currently working with architects to build iconic and architectural masterpieces with our range of cement and concrete products

“We are also working on a construction development lab, which we will use to develop more innovative products to meet local needs.”

Roux said Lafarge was also partnering with government at all levels to speed up the construction of infrastructure and houses.

He added, “Very recently, we signed a Memorandum of Understanding with the Ministry of Lands, Housing and Urban Development and they have allocated to us land in Abuja to showcase with 500 units and how we can help accelerate and build better housing solutions.

“We have also worked with the Ministry of Works and they have allocated to us some contractors relations in order to show what we can do regarding old buildings. We have solutions that can speed up construction and which will cost less.

“The government is looking at working more with less funds and that is why we think we can work together and help them.”

He said that in addition, Lafarge was in partnership with the Works ministry and other institutions to build concrete roads

Roux added, “We are partnering with the Nigerian Institute of Architects because they contribute more to the building of a more beautiful Nigeria.

“For the past two years, we have worked very hard to develop solutions for more durable concrete that will last longer. We have developed very light concrete that can be as solid as steel that can even last up to 100 years instead of having to be changed every five years.

“In order to implement those solutions either for houses or bridges, we need architects and it is very important for us to develop those relationships so that we can showcase to them the very solutions, essentially concrete solutions that can be beautiful.

“In the past in Nigeria, we contributed to the construction of the Cocoa House, the National Assembly complex and a lot of iconic buildings and structures, and we now have to partner with experts.

“As you are all probably aware, Nigeria estimates a housing deficit of 18 million and at Lafarge; we believe we can contribute to reducing this number”

On the possibility of reducing the cost of cement, Roux said what was important was the cost of construction.

He said, “What we want to do is to improve the cost of construction so that it will cost less to finish a building. This is why we are finding more and more solutions so that the cost of construction is improved. We want to achieve stability in the prices of building materials.”

Ekuweme advised the incoming administration of President-elect, Maj.-Gen. MuhammaduBuhari, not to approach infrastructure development haphazardly.

He urged Buhari and his team to develop a comprehensive master plan and follow it meticulously in line with the urgent infrastructure needs of the country

Ekuweme warned against trying to embark on development of all spheres of national infrastructure at the same time without definite plans, saying this had largely been responsible for the failure of successive governments to achieve concrete infrastructure development in the country

He said, “My advice is that the incoming government should develop a comprehensive master plan on infrastructure development. It could be five years or 10 years development master plan based on budget constraints.

“There is also the need to have a yearly plan on implementation. But when you try to build roads, railways, waterways and so on at the same time without a definite plan, then you have issues of abandoned projects and failure to achieve desired development needs of the people.”

The former vice president blamed the problem of frequent building collapse in the country on the engagement of quacks and non-professionals by contractors.

PUNCH.

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The Chinese businessmen, who are currently in the country, are in talks with their Nigerian counterparts to explore some areas of opportunities that include construction activities, building materials, especially, lightings, and alternative power supply.

The firms, Sinafri-Hongye Group of China and Niger-Sino Nigeria Limited, in conjunction with the Hemaded Logistics Group, have pledged to boost growth in the real estate sector.

The Chinese investors, led by the Sinafri-Hongye’s Marketing and International Relations Manager, Mr. Sebbs Azubuike; Director, Mr. David Yang; Managing Director, Energy Unit, Mr. Xu Jacky Ronchang; and Managing Director, Electronic/Electrical of Sinafri-Hongye, Mr. Pan Bing Kui, highlighted their findings and desire to commence business in Nigeria immediately they formalised agreements with their partners in the different areas.

Yang identified real estate and construction as their major areas of interest, but at the ancillary level, lightings, alternative energy supply, especially solar, and by extension, agriculture, would be included in their operations.

According to Yang, Sinafri-Hongye has more than 100 branches globally, with a capital base worth $10bn in real estate, furniture industry and construction sectors.

“Housing provision and power supply are congruous in this age and time when fighting against weather changes that pose threat to the environment is intensifying. Apart from the fact that solar energy is environmental friendly, it is also cost-effective compared to conventional energy supply,” he said.

According to him, when the business takes off in the country, schools, hospitals residential and industrial estates will be targeted for provision of solar energy.

The Chief Executive Officer, Hemadeb Group, Mr. Tunde Akinboun, said the cooperation with the Chinese group in real estate would be concentrated in Ondo, Osun and Ogun states.

According to him, the market potential for real estate in the country calls for investment in solar energy.

“It is economically wise to explore more of solar use, especially for streetlights and other domestic usages,” he said.

The Managing Director, Polons Engineering Nigeria Limited, a real estate firm, Mr. Akin Abiola, said the desire of Sinafri-Hongye to do business in the country was commendable.

He, however, noted that some areas might make or mar the goal, including funding, building materials and cost of production in general.

“Nigeria’s business potential in real estate sector is enormous no doubt, but the truth of the matter is that the climate makes it difficult to achieve the desired goal of making housing available for the low income earners,” he said.

Abiola told the investors that the house types required in the country presently were not for the elites, but rather for the middle class and low income earners.

He also lamented the lack of mortgage facilities in the country, blaming the commercial banks for high lending rates and absence of long-term funding.

“For the success of your business ambition in Nigeria, I will implore you to put these three factors into consideration so that all the stakeholders will be better off at the end of the day,” he told the investors.

The Chairman, Niger-Sino Nigeria Limited, Mr. Olanrewaju Saka-Shenayon, said he was confident that the outcome of the collaboration between the two parties would be successful.

He said his optimism was based on the landmarks that Chinese firms had made in construction works in Africa, especially in Nigeria.

“We have confidence in our new partners and we believe that at the end of the day, we will sign a Memorandum of Understanding and activities will commence,” he said.

PUNCH.

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