You must have heard it said before that the best time to invest in premium real estate was 10 years ago and you wonder why? According to the world bank, Nigeria has an urban population growth rate of 4.1 per cent, with about 52% of the country’s population living in urban areas. This shows that in order to meet the steady growth in demand for housing, around 700,000 houses will have to be built every year.
That’s not all, National Bureau of Statistics stated that Nigeria’s real estate sector accounted for 6.39% of the country’s GDP in 2020 which means that Nigeria’s real estate market is not only large but greatly valuable. The facts are not hidden, the need to invest in premium real estate is not just about the profit at stake, it is also crucial for nation-building.
What then is real estate investing? It is the purchase or sale of land and buildings to earn money and it is a great way to invest since property investments have excellent return potential and help you diversify your portfolio. It also serves as a very good shield from recessions and other adverse economic conditions.
Almost anyone including you can invest in it although it requires time, patience and money of course. Here are 5 simple ways to invest in premium real estate for less
1. Buy Rental Properties
One of the most common ways to make steady cash flow in real estate is with rental properties; buy a house and rent it out. It requires a great deal of effort on your part to find and vet tenants, take care of repairs and maintenance, and deal with any other problems that arise but it’s an excellent way to build wealth and generate income.
2. Use Real Estate Investment Trusts
Investing in a REIT entails you giving money to a trust or corporation which purchases a property. You’ll get a portion of the dividends as the property appreciates. It is an easy way to get into the commercial premium real estate world with a potentially high yield.
3. Flip Properties
When an investor buys an undervalued residential property, renovates it, then sells it at a higher price, it is called ‘flipping’ or ‘trading’. This type of investment is best for seasoned real estate investors who know how to hedge their bets with the local market.
4. Invest in Building
Going all the way to build is a smart way to invest, however, this is heavily dependent on your access to funding. However, this is the most-tasking of all four methods in this article. Do your due diligence, discover large home-builders and partner with them to supply needed materials needed for construction and renovation of houses.
It is not too late to invest in premium real estate but make sure to pick an investment that will serve you. Decide on how much capital you are willing to invest and begin to save money. Before you make the move, also ensure to speak with a real estate expert, you do not want to invest badly. Lastly, do not forget that it requires time and patience.post
While there are good deals in real estate, the truth remains that not every real estate property is right for you. It is quite natural to want to snatch a house or property with an affordable price tag but it is important to keep in mind that the value is most likely proportional to that price. If a house is listed at a cheap price, there has to be a reason and it is your place to do your thorough findings.
Home buying these days is no easy feat and if you’ll be buying at all, it is only right that you buy not just a home but also, the quality living experience that comes with it. Here are some warning signs a real estate property is not right for you.
It is true that prices tend to reflect value oftentimes; if the house seems cheaper than others in the neighbourhood, then something may just be amiss. It could be that there are expensive structural repairs that are not obvious that you’ll have to make or just maybe, the house has incurred bills and liabilities that the seller wants to pass on to the prospective buyer.
Chances are that you are already familiar with the neighbourhood in which you are buying. This means that you can guess how much homes tend to cost in that area, so if the price tag doesn’t match in comparison to others in the neighbourhood, try and figure out why.
Also on the flip side, if a house seems priced beyond your budget or means, that may also be a practical sign that the property you are considering is not right for you. It may just be wise to consider a relatively more affordable piece of real estate that will not pose such risk to your financial security, after all, your budget was set for a purpose.
No matter how great a house is, it is not right if the location is not great. Look beyond the aesthetically pleasing structure and focus on the surrounding area. Getting a house in a high-risk flood zone or a high crime rate zone is more of a liability than an asset.
Find answers to questions like; Is the property in an already well developed or developing area? What are transportation costs to the neighbourhood like? Are there schools or businesses around? Visit the house, take a tour of the neighbourhood, and ask questions because these factors are crucial.
3. Inadequate information
If the seller cannot provide adequate information about a property, that’s a red flag that should not be overlooked. Whether it’s paperwork relating to title documentation or those detailing permits for major structural and electrical works in the house, ask to see documents.
Make sure that the titles are clean, and there are no disparities in who is listed as owner and who is selling. Gather as much information as you can and make sure to diligently check the documents provided. If you really have to make a decision in the dark, buying a property should not be that decision; ask all the necessary questions and get all the required answers.
4. A long list of fixes to make
While it is true that some things can be overlooked when buying a house, do not buy a property if there appear to be too many repairs to be done. Whatever renovations that are required should be those you’ll need to do to make the house as aesthetically pleasing as you’ll want, rather than having to restore basic amenities.
It is important to be conscious of the fact that there’s is an incredibly thin line between a good real estate property and a money gulping liability. Do not be in a hurry to buy a property, do your due diligence and do not ignore the warning signs.post
Once the decision has been made to acquire Real Estate for investment either for personal use or otherwise, the next consideration apart from one’s budget is usually for one to determine where exactly in Nigeria one would like to buy.
Whereas the budget available may influence whether one eventually buys the property or builds it, the decision as to geographical location tendstend to depend on the preferences of the prospect. In this regard, multifarious factors such as one’s primary place of work, access and availability of infrastructure, security of neighborhood, likelihood of the property locale to appreciate in value over time all tend to come into play and the interplay of considerations such as this will eventually inform a prospect’s final decision.
Whether buying property in Lagos, Lekki or anywhere else in Nigeria , bBeyond the decision as to the broad geographical location that one wants to buy into however, a second layer of the decision making process would be to decide whether to buy within a gated and serviced Estate or whether to buy property that satisfies one’s pre-determined criteria but is not necessarily within a serviced Estate. Based on our experience however and in line with one of our Top tips to owningowing your own home, our recommendation would be for a prospect to buy a property within a serviced and gated Estate.
Nevertheless, we do recognise that several prospectsprsopects are sceptical of buying into serviced Estates due to what has befallen some of these kind of Estates and believe that if they are in full control of their property it would fare better. We will try to address some of the concerns prospects might have with regards to buying into serviced Estates they have in this regard as in the following paragraphs.
Property Maintenance Concerns
Mr. Benson lives abroad and wants to invest in Real Estate within a serviced estate in Nigeria. However, he is a little skeptical because he has heard that most serviced estates in Nigeria tend to run down over time due to poor maintenance practices and he does not want the value of his investment to depreciate as a consequence of this trend.
There is no gainsaying the fact that, all things being equal, Real Estate investment holds a lot of potential financial rewards. However, some investors are sceptical about buying Real Estate in serviced estates because of the apparent perception that there is a widespread lack of adequate property maintenance culture in Nigeria. There also seems to be an unwritten perception that many serviced estates in Nigeria run down within a relatively short period, and that this is mainly due to poor facility management/maintenance services.
Quite a number of seasoned Facility Management professionals seem to believe that the maintenance culture in Nigeria is still at a rudimentary level and this poses quite a challenge with regards to preservation of real estate value both in the public and private sector. Unfortunately, the prevailing evidence appears to support this view even though the trend is more evident with public or government-owned properties whilst privately owned and managed properties appear to fare somewhat better.
Generally, it would appear that very little premium is placed on the use and maintenance of communally-owned infrastructure and equipment by the various stakeholders but notwithstanding, there are quite a number of Real Estate developers that still maintain a high standard when it comes to provision of Facility Management/Maintenance services, thus preserving and increasing the value of real estate assets within the estates they have developed.
Having taken a cursory look at several serviced estates that have rapidly become dilapidated or are showing signs of heading in that direction, one common denominator that apparently can be discerned with such serviced estates appears to be the relatively “poor management” of such estates though it is noteworthy that there may be in addition some other hidden factors responsible for this unwelcome state of affairs.
In the light of this observation, it thus appears pertinent to pose the question; What do serviced estates that have sustained their post-construction ambience and have been able to maintain delivery of quality facility management services for many years have in common? This question is fully answered in the following section of the post.
Top key factors well maintained serviced estates have in common:
The right strategy and team:
Serviced estates that have maintained the provision of high level services to the residents over a long period of time have done so as a result of putting in place the right long-term strategy and having the right property and facility management team to drive this strategy. No matter how sophisticated the maintenance plan, without the right team, there will likely be failures in delivery of service.
Selection of residents (buyer/tenant):
As much as every property developer of serviced estates desire to sell all units within their developments as quickly as possible, the more discerning developers understand the importance of proper screening of the buyer and /residents that will eventually live within the estate. From experience, one key success factor in the management of serviced estates is co-operation and /teamwork between the Facility managers and the residents. Getting the right mix might initially seem difficult but certainly, a considerable step in the right direction would have been made through an effective use of the screening process towards this end.
Transparency of facility managers:
When residents perceive that the facility managers are not being forthright, issues in the estate could degenerate to the level of non-payment of service charge, increased number of vacant apartments, litigations etc, all of which would certainly affect the Estate managers’ ability to maintain the estate adequately. Facility managers of well-managed serviced estates are well aware of this trend and thus they endeavour to maintain a visible sense of transparency and inclusiveness.
In the words of Benjamin Graham, “Successful investing is about managing risk, not avoiding it”. Investing in Real Estate within a serviced estate is generally a very good option, therefore what is essential is to eliminate or reduce the potential risks as much as possible.
For more on Real Estate investment, ensure you follow this space as we seek to enlighten you and assist you in taking the right Real Estate decisions. You can also contact us by replying to this blog if you require real estate advice.
Beachway homes are an award-winning residential property developers in Lagos offering quality serviced Estate properties in the Lekki area. Contact us today!post
Investing in Real Estate in Lagos, especially in terms of owning one’s own home in the Lagos area, remains a major objective for most individuals. In this regard, there are two major modes of property acquisition in the Nigerian property space. One could acquire a property through outright purchase of an already developed property, or on the other hand one could build a property to one’s particular tastes.
Whilst the thrust of the majority of our discussions in our various blog articles is towards those desirous of acquiring property through the purchase of already built-up properties, we do acknowledge nevertheless that there are still quite a few individuals interested in acquiring property either for personal use or Investment who do give serious consideration to taking the alternative route of purchasing undeveloped land and building to their own specifications. Consequently, we would want to look at the pros and cons of either approach and highlight the circumstances under which one may be preferable to the other and also provide some guidance for those who may still be undecided as to which approach would work best for them. Elsewhere we will discuss our top tips to owning you own home in Nigeria, navigating the house buying process and the importance of title search, as well as strategies for selecting the right builder.
Factors Influencing Property Acquisition Modalities
Over the years, the preferred mode of property acquisition for majority of individuals in Nigeria and Lagos in particular has generally been in correlation with the prevailing economic and social conditions in the country at any given time and have apparently been generally influenced by the four key factors enumerated below;
- Relative availability and access to Government led interventions in public housing.
- Availability and ease of acquisition of land within and around the Lagos metropolis.
- Relative availability of building construction and consultancy expertise in Lagos.
- Ready availability and affordability of Construction inputs and materials.
An understanding of how the above factors have affected property acquisition modalities over time would help situate our recommendations regarding the optimal property acquisition mode to adopt for one’s purposes.
To Buy or To Build – Determining What Works Best For You
Although the the preponderant mode of acquiring property in Lagos now seems to be through purchase, there still remains a significant percentage of people who still prefer to travel the construction route. And having now acquired a better understanding of the current state of the factors affecting Real Estate acquisition, the following are guidelines to consider in deciding which route may best be suited for one.
Buying a Property in Lagos – Either Fully Completed or Off-Plan
The following points outline why a completed or off plan property in Lagos could be your ideal form of buying a property. It should be noted that this won’t suit everyone and it is ultimately down to your personal preferences. Here are some points you might want to take into account when deciding which type of property to buy in Lagos:
- Buying either a fully completed or off plan property in Lagos is the ideal option for anyone who wants a more or less typical house without any features that are specific to his/her taste or lifestyle. The key requirement to be considered in this case is thus that of deciding the particular house type desired. This could be a detached duplex, a semi-detached one, a terraced apartment or a flat. Notwithstanding however, the potential buyer may still want to ensure he is able to make some modifications to the generic house type he is buying and this may also be a factor in deciding which particular developer to work with in this regard.
- This method of property acquisition is also perhaps the more obvious option for someone acquiring property for investment purposes as it reduces involvement in the acquisition process to the barest minimum. If you are looking for a quick property investment then buying a fully completed or off plan property will suit you best.
- Thirdly, for someone with a specific budget and not willing to take the risk of possible price fluctuations or variations that usually occur during the construction process, buying the property outright is usually the better option.
- Finally, for anyone not cut out for devoting the time and energy required for tracking and administering the design and building construction process, buying a property outright is also the most appropriate option.
Building Your Desired Property to Your Specification
The other way to own a property house in Lagos, is to look at building the property to your specification and taste. Again, this could not be the most suited choice for you but you might want to consider it as an option. The following points should be taken into account if you are thinking of owning a property in Lagos but don’t know if to buy or build it.
- For anyone desirous of acquiring a house that would be designed to their own tastes and for their peculiar needs, direct construction would be the most optimal approach to take.
- Secondly, if one does not have funds to make an outright purchase but would prefer a situation where payment for the acquisition of the property is spread over a significant period of time, buying land and building on it is the most viable option in that case.
- In taking this route however, one would be well advised to acquire land for the proposed building within a well laid out estate and from a reputable company or individual. Such a piece of land should in addition be well investigated to ensure it has a sound title before any money changes hands. In this regard, you might want to read our post about the importance of property title search.
- An individual going this route is also well advised to employ the services of qualified building consultants who will help guide him or her through the entire building procurement process, ensure all necessary technical diligence is carried out and advise on the relative merits and demerits of the multitude of building materials and components now available on the market.
Acquiring a property in Lagos either to make it your home or as an investment is never an easy decision. One of the early questions that one makes is to whether to buy or build the property. In this post we have outlined why you might want to buy a fully completed or off plan property in Lagos or build your own to your desired specifications. There is no right or wrong but you need to make an informed decision of which choice is best for your own circumstances and preferences.
After reading this article, we hope you have a clearer understanding about which option to go for and if you decide to buy a fully completed property, we invite you to check our residential real estates in Lagos and the Lekki area, you might find exactly what you are looking for! At Beachway Homes we are proud of being one of the leading property developers in Lekki (Lagos).post
“Owning a home is a keystone of wealth… both financial affluence and emotional security”. -Suze Orman
At a certain point along almost every individual’s life trajectory, owning a home becomes a cardinal objective, this is especially so in Lagos, Nigeria where residential accommodation tends to be quite expensive and one can easily spend a huge chunk of one’s salary on rentals for several years making it more and more difficult over time to acquire one’s own home. As real estate developers in the Lagos area of Lekki, we see many young couples decide to take the plunge early with regards to acquiring a home in Lagos.
Within the Lagos area, one observes a strong tendency for many aspiring homeowners to want to buy a home in any of the sought after residential estates in Lekki and there are good reasons why this tends to be the case. In the light of this, we would want to look at some of the reasons for this trend and see why it might be to your advantage to buy your first or perhaps next house in Lekki.
The Natural Lekki Ambience
Lekki has a certain appeal to it that many other locations in Lagos do not have. Lekki is a natural peninsula, a roughly linear landform bounded on its longer sides by two large bodies of water – the Atlantic Ocean and the Lagos Lagoon – while being connected to the Lagos mainland through Victoria Island and Ikoyi. With the presence of these important water bodies, Lekki is a natural Leisure and Tourist haven and its scenic waterside and beach views give it a compelling attraction. Apart from these two water bodies, there are other water channels, lakes and mini-lagoons within the peninsula that add to Lekki’s natural beauty and ambience.
Lekki – The Future Business and Industrial Hub of Lagos
Buying a home in Lekki presents a great residential property investment opportunity. The Lekki peninsula which is still developing physically and in terms of infrastructure is being positioned as the future business and logistics hub of Lagos and indeed the South-Western region of Nigeria. This is being done mainly through the development of the Lekki Free Trade zone and the associated Lekki Deep Seaport.
Whilst the Free Trade zone which is a private initiative provides for the development of industrial and manufacturing clusters including the acclaimed Dangote Refinery, the Lekki Deep Seaport is meant to facilitate exports of the finished goods and products thus generating significant economic activities in the area.
An international airport is also being planned at the tip of the Peninsula close to Epe which will similarly facilitate ingress and egress of Tourists, Businessmen and Expatriate workers visiting or working in the Free Trade zone. These developments have no doubt continued to stimulate appreciation in land and property values in the entire Lekki axis and thus present an immense investment opportunity for those who decide to buy houses in Lekki.
Availability of Land and Variety of New Builds
As Lekki is still a developing area relative to most other parts of Lagos, large tracts of land remain available for investment and construction purposes. For those looking to invest in Real Estate at the most basic level therefore, Lekki is arguably the most attractive location to look at in this regard as it presents the most viable location for buying land and building to one’s specification. Due to the availability of land also, Lekki has become the preferred investment destination for a majority of real estate developers which results in a surfeit of new builds in the Lekki area. Thus, if one is looking at Real estate investment at the new build level too, Lekki also remains the preferred location to consider.
Consistent Rise in Property Values
Due to the fact that Lekki is still a developing area coupled with the huge commercial investments currently being made in the Lekki axis, property values in the entire Lekki peninsula continue to rise. This rise in property values is further fuelled by the activities of speculators seeking to take positions in anticipation of future benefits. This trend of continued rise in property values in addition, present as both a favourable investment history for the area and also as a good investment opportunity for discerning observers who may wish to take advantage of same.
Numerous Shopping and Leisure Facilities
Another factor that makes buying a home in Lekki so attractive is the fact that Lekki perhaps has the greatest concentration of Shopping Malls as well as Leisure & lifestyle outlets such as Cinema Halls, Fitness centers etc. in Lagos. The presence of these kinds of facilities ensures that buying your home in Lekki gives you a better opportunity to achieve the desired work-life balance that is the goal of many individuals desirous of living a contemporary lifestyle.
Thriving Service Sector
In the Lekki area, due to the rapid growth of residential accommodation, private entrepreneurs have sought to take advantage of the burgeoning population by providing numerous services required by the residents. These services include Educational facilities, Hospitals and clinics, Pharmacies, Supermarkets and ‘Village markets’, Laundries, Restaurants etc. the presence of these facilities not only make it more attractive and convenient for those desirous of a home, to buy houses in Lekki, they also present an opportunity for those seeking to provide such services to as well acquire homes in the Lekki area and ensure proximity to their businesses. In this wise, Lekki can be considered as an evolving holistic business-residential environment providing a relatively great level of convenience to people living within the district and with little need to interact with other proximate residential/business districts
From the forgoing, it can be seen that there are few cities in Nigeria that can compete with the amenities Lekki has to offer, and if prior to now, you have never considered getting a home in Lekki, we believe with the information we have provided you should now see why it is definitely something worth looking at. Our company Beachway Homes is engaged in building homes of the highest standards within the Lekki axis and we suggest you contact us today to make a booking and see our available properties for sale in the Lekki area of Lagos so you can join the numerous individuals enjoying the perks of living in Lekki.
Challenges in real estate investment in Lagos or beyond can be frustrating. This blog post addresses some of these challenges, faced by both new and experienced real estate investors, and will hopefully help you own your dream home in Lagos.
As property developers in Lagos, we have come to realize that most of the people we speak to have a tendency to get frustrated with all the “big” words, jargon and abbreviations as well as the terms used in real estate transactions. However, there are some real estate terms you should know!
This post highlights some of the more important investment terminology used in real estate transactions with regards to appraisals, what they mean and how they are used in the financial sector of our business, which in return will help you feel more comfortable with the process of real estate investments.
A small disclaimer, this post is a very brief explanation and is in no way a definitive guide on financial terms and challenges faced in this industry. Please speak with us at Beachway Homes on any specific topics about your specific situation.
In this post we will be addressing real estate appraisals and all its terminology.
What is an appraisal?
An Appraisal is the analysis of the viability of a project, and has some models attached to it to accomplish this. DCF or Discounted Cash Flow, Payback Period and Return on Capital Employed or ROCE are the more complex models used for Appraisal.
Real Estate Appraisal Terminology Explained
Discounted Cash Flow (DCF)
(The Discounted Cash Flow, also known as DCF, is the Appraisal technique used that discounts all periodic cash outflows and inflows, at a specific discounted rate versus their present value.
The Present Value is the sum of the discounted cash flows.
Internal Rate of Return
The internal rate of return is the discount rate that equates the NPV to zero. When a project has an NPV that is positive or above a certain benchmark and the Internal Rate of Return (IRR) is above a certain cut-off percent, then the project is viable.
The Discount Rate is the rate of return to discount cash flows. This is commonly referred to as the Weighted Average Cost of Capital (WACC) or Total Return (Rental Yield plus Capital Growth). Specifically in Nigeria, the WACC rate used is typically the sum of the lending rate plus a premium to cater for risks and the developer’s profit.
When buying real estate, terminology can be overwhelming especially when referring to financial investment terms. This article on Wikipedia has more detailed information about real estate appraisals worth reading.
At Beachway Homes we specialise in guiding you through all the buying process, from finding your perfect home or property investment in Lagos to going through all the transaction details, and helping you understand all the real estate investment terms and jargon that goes with it.
Research and information provided by Kolapo A. Daniyanpost
Imagine this conversation.
“Good evening Alhaji, can you please take this LPO as an instruction to supply 12 tonnes of reinforcement to our site early tomorrow morning?”
Alhaji sighs and replies: “Where do I start? Getting the materials to site is not the issue, but prices have increased from N175,000 to N240,000 per tonne in the last two weeks”.
Infuriated by his response, I asked rhetorically, “who increased the price?” He exclaimed and replied, “the manufacturer Sir”.
“Okay, please stay action on the delivery. I will discuss with the Managing Director and revert tomorrow”.
The above conversation actually happened between myself and one of our suppliers. There has been a 27% increase in the cost of reinforcement within a short period of time and the above conversation has been the usual response received from various suppliers of building materials, particularly in the last few months.
From personal experience, having built and sold numerous residential properties in Lagos, I can confidently say that over 60% of the total construction input goes into building materials. With this percentage, there is no gainsaying the fact that materials are about the most significant component of a building project. Little wonder any slight increase in material prices could spell doom for overall project cost.
Construction material price fluctuations are a reality! Let me explain the causes of price fluctuations in construction and their impact on project delivery:
What is fluctuation all about?
Recently we received an inquiry from a prospective client on our social media platform that read “why do so many developers default”? Whilst we know so many factors could be responsible for this, construction material price fluctuation is a likely significant cause of this phenomenon in Nigeria.
Fluctuation simply means a situation where there is a change in the cost of materials during the course of a project.
Provision for fluctuations in construction contracts provides a mechanism for dealing with the effects of inflation. On smaller projects, the contractor will be expected to take inflation into account when calculating his prices; while on larger projects, the contractor may be asked to tender based on current prices and then the contract makes provisions for the contractor to be reimbursed for price changes to specified items over the duration of the project.
Prices of building materials have skyrocketed in the last two years due mainly to the persistent fall in the value of the Naira, with the price of materials such as reinforcement bars and cables increasing by almost 100 percent during this period.
Some specific examples of such large price increases are;
- Cement which moved from N1,600/bag in April 2016 to N2,650/bag in April 2017,
- Reinforcement which moved from N130,000/ tonne to N245,000/tonne over the same period,
- Emulsion and Textured paints as well as Electrical lighting fittings which increased by between 30-35% in price, and Electrical cables which saw increases of 100-120% over the same time period apparently because of the fact that the raw materials for the production of these cables are virtually 100% imported.
The list below though not exhaustive, discusses some of the causes of construction raw material price fluctuations and will give further insight into this issue;
Causes of Construction Material Price Fluctuations
Over-reliance on importation
Most of the raw materials used in producing building materials are not available locally and since payment for any imported material has to be made in foreign currency, whenever there is a dip in the value of the Naira, the cost of imported materials also rises.
Government Fiscal Policy
Government policy sets the economic environment in which all sectors operate including the building materials sector. Unfortunately, most of the recent CBN policies such as the devaluation of the Naira, granting of special access to FOREX for specific sectors, aggressive injection of dollar supply into circulation, etc. have yielded no meaningful result as far as raw material price fluctuation is concerned.
Lack of power supply can leave manufacturers with no other option than to use alternate power sources on an almost 24-hour basis. Road network to transport goods to their final destination is also of great concern, not only due to increase in the cost of diesel and dilapidated road network, but also due to the comatose nature of our rail system, which is more or less non-existent.
Profiteering by material suppliers
The best illustration one can give here is the speed at which our vendors increase the price of their goods whenever there is a drop in the value of Naira and their hesitance to reduce their prices when the Naira gains some strength against foreign currencies. The excuse usually given by construction material suppliers is that, reducing their price whenever Naira strengthens against the dollar, will affect the quantity of their physical stock, which in one’s opinion is not really tenable.
Fluctuation in the cost labour
Most of the workmen engaged to produce these building materials locally have increased their daily wages by almost 25% due to decline in the purchasing power of Naira and this has ultimately translated to increase in material prices.
Other causes of building materials price fluctuation include fluctuation in the cost of raw materials, petroleum products (energy costs) plants and equipment, as well as higher interest rates.
Impact of Material Price Increase on Project Cost
Materials’ price fluctuation will lead to increased cost of construction for the Developer and possibly ultimately to the buyers. As property developers in the Lekki, Lagos area we are impacted when there is an increase in construction material prices.
Shoddy project execution
The dangerous trend here is that unscrupulous developers may result in cutting corners to protect profit margins. The resultant effect is that materials utilized may not meet specified standards. I must however stress that this is not the case with us at Beachway Homes.
Infiltration of the market with substandard materials by some vendors in order to seemingly maintain existing prices whilst the real aim is to maximize their profit.
Building project abandonment
Rampant cases of project abandonment due to increased cost of construction have also been recorded over time.
In the long run, persistent price increases can lead to increased shortage of housing with the millions of middle and low-income families being priced out of the market for home ownership.
Impact on construction material fluctuations to the prospective homeowner
How does the foregoing information assist the prospective homeowner in his property acquisition process however, the following are some points to note.
- Potential subscribers should diligently research the pedigree of the developer whose real estate scheme they are looking to key into. And should deal with only developers who have a proven track record and would not resort to watering down quality when faced with price fluctuations on an ongoing project.
- Dealing with experienced developers also reduces the chances of property price increases once the subscriber has keyed in as they are more likely to have allowed for possible price fluctuations over the project duration.
- Buyers should beware of schemes that are seemingly priced low as this may be a sign that the developer has not taken into account all necessary variables in arriving at the advertised sale price and the project may eventually run into troubled waters.
- Buyers should also review the project sale terms to see what options are available to them in the event the Developer defaults, significantly reviews the building sale price after project commencement, or fails to adhere to the earlier indicated building specifications and quality of materials.
- As a last resort, potential buyers may also look at making some additional contingency sum available over the agreed sale price to cater for possible price variations in the course of the project.
As explained in this post construction material price fluctuation can have an effect on the Supplier, the Developer and also the property buyer. At Beachway Homes we strive to get the best building materials at the best prices for our projects and do acknowledge material price fluctuations are a reality.post
“Owning a home is a keystone to wealth, both financial affluence and emotional security” – Suze Orman
Is Real Estate investment the “Real” deal? Is Real Estate a good investment? Why not invest in stocks, shares and bonds? Many people question whether investing in Real Estate is a good option, especially in Nigeria. We have come across clients who have asked us this question oftentimes, and our answer remains a resounding Yes. Stocks and bonds are good but Real Estate investment is the “Real” deal. Property is indeed a good investment!
In the words of Armstrong Williams, an American media/business mogul, “Now, one thing I tell everyone is to learn about Real Estate. Repeat after me: Real Estate provides the highest returns, the greatest value and the least risk”.
According to Maslow’s hierarchy of needs, a theory in the world of psychology, Shelter is ranked among the top three basic needs of man. Therefore, there is no gainsaying the fact that owning Real Estate, known in industry parlance as “Brick and Mortar”, is a top desire for many people and for good reasons too. Real Estate which is defined in this article to mean “Land”, with or without a structure on it, has been a popular investment vehicle for many centuries, and continues to be.
Why is Real Estate a Good Investment? What Makes Real Estate Investment the “Real” Deal?
Simplicity of Real Estate Investment
As the name suggests, this type of investment is “Real”. Investing in Brick and Mortar means you can get in a car or send a proxy if your property investment is outside your country of residence, just to physically check on your investment. It is that simple!
Most of the stories we have read about companies that declared bankruptcy, leaving shareholders in debt or in some cases leading to death, have something in common, that is, the shareholders more often than not, have to solely rely on the figures declared by the company whether falsified or true. Whereas, with Real Estate, you can easily monitor the progress of your investment by simply driving down to the location to check the condition of your asset and doing a quick market analysis of your own to be sure you are receiving a good yield from your asset.
Here are some of the reasons why you should invest in Real Estate:
Property Yield and Worth
Investing in Real Estate can be a fantastic retirement plan, though no plan can be perfect, as the yield and worth of a Real Estate keeps improving year-on-year, all things being equal.
“Yield” relates to the annual returns receivable from a Real Estate investment while “Worth” simply is the Investment’s equivalent in value. What we have come to realize in our varied experience with clients, is that many prospective Real Estate investors only focus on the probable yield from Real Estate. They judge the profitability or otherwise based on yearly returns, often forgetting that the worth of the Real Estate can increase by between 20% -25% within the first year of completion. This in essence means that the whilst annual returns received from a property is say between 5% – 7%, the worth of the property grows simultaneously.
As a Real Estate investor, you are worth more every year and you necessarily do not need to possess the ability to read the stock market or the performance of a company, as in the case of stocks and shares. Even when you go into retirement, your Real Estate investment continues the work for you. Therefore, it is always important to look long-term with Real Estate investment.
Real Estate Investment Stability
Real Estate investment provides a lot of stability for investors. The volatility in the real estate market is much less than that in the equities and bonds markets because the real estate market may not be such an interesting market for short-term speculators to operate in. Also, in the words of Cherie Barber, a professional property renovator who has made a fortune from real estate, “Properties in well located area’s, underpinned by good supply and demand, rarely crash overnight or even over extended periods of time. They hold their own or at least level off and rarely experience major falls”.
A wise investment in Real Estate will most often than not provide the expected yield without fail, with very little risk of it crashing overnight. For smart investors who can see beyond immediate returns, Real Estate is generally a very safe investment.
I will conclude with a true-life story of someone I know very well. A man was offered an opportunity to invest in Real Estate in highbrow Ikoyi in the 70’s when land in this location was still relatively cheap, but did not seize the opportunity. Now, in 2017, 1000sqm of land in Ikoyi can be in the region of N300 – N400 million, or even higher, depending on the location, zoning etc. The man regretted not making the move then.
Mark Twain said, “Buy Land, they’re not making it anymore”. Therefore, remember to do something every day that will take you closer to being a Real Estate investor. The time to invest is now!
In starting off your Real Estate investment journey however you may need to first of all decide which property acquisition mode suits you best – To Buy or to build..? Whilst we would also recommend you take cognisance of our Top tips to owning your own home. Happy investing!
Written by Babajide Aloba