Is it possible to ask for the price of a Bentley in exchange of the quality of a Toyota? Impossible! Any sane person knows that. While many will consider this outrageous, it is indeed a stark reminder of the realities experienced in Nigeria’s real estate industry.
As an avid property enthusiast, developer or an observer, you must have noticed the surge in the number of empty apartments in Ikoyi over the last few years. This disturbing phenomenon must have prompted the well-informed and educative research publication of economy watch, Financial Derivatives Company Limited, last week, which pointed out that “the number of vacant properties in the upper class real estate neighbourhoods of Lekki, Victoria Island and Ikoyi has risen by 72 percent over the last 18 months”.
The padded cost of construction. Buyer Beware! This has become a motto on a whole new level for perceptive investors, who seek the much-deserved value for money. I can’t stress enough, the fact that the era of monkey dey work, baboon dey chop is long gone. 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.
For example, the fact that former UK Prime Minister David Cameron said Nigeria was ‘fantastically corrupt’, did not in fact mean each and every Nigerian was. Also, the fact that a few celebrities find themselves enmeshed in marital problems does not always mean that the marital life of every Nigerian is in danger. To put this more clearly, apartments that should not cost more than N100 million are costing investors N400 million to construct. Therefore owners have no other choice than to let out the apartment at N40 million, transferring the padded cost of construction to tenants.
‘What’s the difference between the locally fried plantain bits sold in remote areas and its counterpart, the plantain chips sold in urban areas? Have you ever wondered why a good meal prepared in Ijebu Ode would cost less than one sold in Lagos? An estimated rental for an apartment in Ikoyi is about $80,000. The same apartment in Lekki would cost $30,000. What do you think makes the difference? VALUE – price, quality and location put together in the same place! If location is a fundamental principle in real estate, how much more luxury real estate?
A developer who compromises on the 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.
During a program on CNBC Africa, It was pointed out that luxury is not expensive. 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 $1M. 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% higher?
A delicious meal requires a lot of money. 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. 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 plummet and downtrend of major economies across the world, individuals and organizations 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.
Nigerian developers must realise that times have changed. The ‘quick fix – quick gain’ syndrome has ended. Real estate developers who fail to understand that the current investors and real estate enthusiasts are upbeat about quality and finishing after having seen same from their travels around the world will soon fade away.
If we desire to be the best and want to compete with foreign developers such as the Germans, Lebanese and Italians that have spent decades mastering their craft, we will need to raise our standards in the Nigerian construction market. Or else, one day we would wake up to find all our apartments empty.