Buy or Build – Which approach works better for you—— August 13, 2020
Investing in Real Estate especially in terms of owning one’s own home 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 same 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, navigating the house buying process, 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 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.
- 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
Property acquisition trends in Lagos from Independence up to the Eighties.
Property acquisition in Lagos from the late Sixties up to about the mid-eighties, was tilted more towards acquiring land and subsequently erecting the desired structure gradually. This was due to the fact that apart from a short period in the late sixties to early seventies where the government facilitated mortgages for Civil servants to acquire property in certain schemes, few individuals had the financial resources for outright purchase of houses whilst there was a relative dearth of fully developed housing schemes that citizens could subscribe to.
During this period the state of the four key factors enumerated above was as follows;
- There was a fairly consistent though limited attempt by the Central government (which was then located in Lagos), its agencies, as well as the State government to provide housing for the Citizens through large scale housing interventions such as the ‘Surulere’ housing Scheme, the Surulere Games village, FESTAC Town, the ‘Satellite Town’ and several other mass housing schemes developed by the LSDPC especially in the period 1979 to 1973. Such housing schemes were sold to members of the public through various modalities and served as a significant means of property acquisition at that time.
- As for availability and ease of acquisition of land, urban development was generally relatively fairly well-ordered and controlled in Lagos during this period, especially in the major developing neighbourhoods of Yaba, Ilupeju, Ikeja and others. Apart from the residential layouts initiated by the government, well-planned layouts were likewise required from private land owners such as was the case with the various Ajao Estates on the mainland, Oyadiran Estate in Yaba, Ire-Akari Estate in Isolo, Wemabod Estate in Ikeja and several others which were all mostly site and services schemes. Commencing from the Sixties, there were also similar residential schemes initiated close to the industrial estates in Ilupeju, Iganmu and Ikeja by the Government of the Western region . For other private land that was not so well articulated, security of the land after purchase was not a major challenge and in the light of the foregoing, it can be argued that at this period, acquisition of land was not such a huge challenge if you had the funds and was also relatively easy and risk free.
- With regards to construction expertise, a notable feature of this period was that both design and construction expertise was fairly readily available at affordable costs. Majority of practitioners at that time had been trained either in the United Kingdom or at one or other of the Expatriate owned Architectural practices and Construction firms in Lagos, had been exposed to standard work practices and were well grounded in same. In addition, merely by liaising with personnel from the planning offices within the state, one could obtain reliable references for building design consultancy and supervision. In overall terms therefore, sound construction expertise and advice was largely available to the average person during this period.
- Finally, as regards construction materials, this sector was dominated by very few companies at the time. For example, Nigerite supplied over 80% of Asbestos roofing sheets used in construction, Crittal hope supplied majority of Louvred and casement windows, Dunlop Industries provided PVC tiles, whilst Dulux and Berger Paints supplied majority of paints. Other items such as ironmongery and suchlike could easily be obtained at UTC Technical or Leventis Hardware shops. In short, quality construction materials could be purchased by any layman with little knowledge of construction simply by visiting any of the established construction showrooms and placing orders for the products required. From the foregoing, it is clear therefore that at this time, the construction route for property acquisition was not a major challenge for those who could muster the necessary funds since land, construction expertise as well as materials were readily available.
Property Acquisition in Lagos from the Eighties
With the end of the oil boom of the seventies and the ensuing collapse of the Nigerian Economy, the dynamics of the property acquisition process in Lagos and its environs underwent some fundamental and enduring changes. These changes affected the average citizen’s ability to acquire their own property and over time led to the advent of private real estate developers as well as an increased preference for the option of property acquisition through outright purchase. It is from this period that one can say that the possibility of finding houses for sale in Lagos increased dramatically. The changes that led to the new situation can likewise be examined along the lines of the four factors influencing property acquisition modes as earlier discussed above.
- In the immediate aftermath of the Economic crunch of 1983, there was a sharp contraction in construction activity around the country generally due to the drop in Oil export revenues. The sudden contraction in Government revenues naturally affected the entire gamut of government activities and most especially those activities having to do with expenditure and investments in infrastructure and housing projects. Thus in Lagos for example, many of the housing projects initiated by government parastatals such as the CBN, NNPC and some major banks were suspended or fully halted. Whilst some new housing interventions by the LSDPC resumed after an initial lull, these were nothing near what had been witnessed between 1979 and 1983 and were largely targeted more towards the upper middle classes. Furthermore in terms of quantity, these new schemes could barely meet the housing need of the rapidly increasing population of the city.
- Demand for land had on the other hand experienced a significant increase due to population pressures. The inability of the government to expand roads and transport infrastructure and open up new residential areas also put pressure on the few existing available areas. The resultant effect of these developments was that the trend of land owner families reselling the same parcel of land to different successive buyers took root and gradually became the order of the day. Consequently, land acquisition for subsequent construction became an unpredictable and highly risky venture with many individuals losing significant sums. This was due to the fact that plots of land they had earlier been sold were resold to other parties and the initial purchasers were unable to obtain prompt legal redress in most cases.
- On another front and with reference to availability of construction expertise, the economic slump gave rise to a situation in which people intending to purchase or acquire property increasingly tried to look for bargains and save costs. Such people therefore resorted to employing artisans directly rather than working through building professionals. This trend of course encouraged all kinds of persons to venture into construction activities even when they were not adequately qualified or trained in the field whilst their intending patrons turned a blind eye to their glaring shortcomings in a bid to save some money until the project ran into some problem or the other. This type of scenario of course only served to accelerate the emergent trend of poor construction practices and eventually resulted in generally poor quality of construction across board.
- Similarly, the Economic troubles of the mid-eighties to mid-nineties created difficulties for many of the hitherto large manufacturing companies and those that were not able to adapt, rapidly went into decline. By the late nineties, the construction materials sector which hitherto had consisted of just a few stable players became increasingly fragmented as new materials were introduced for various building components such as Windows and Roofs whilst importers turned to various countries outside Europe (which had hitherto been the traditional choice) for various other construction inputs.
Many of these imported materials which initially came mainly from Asia were however quite substandard in many cases as importers seeking to sustain their margins in the face of the continued slide in the value of the National currency encouraged suppliers to water down quality in order to remain within a specific price band. In terms of availability of quality construction inputs therefore, this second period saw a sharp slump in quality but a large boom in construction materials options. These were however more difficult for the layman to assess and adopt for their proposed projects without expert guidance due to their relative novelty.
The foregoing scenario was the prevailing situation in the late nineties and due to the increased complexity of achieving one’s property acquisition goals through the construction process, this state of affairs eventually served as a catalyst for the emergence of housing estates developed by private entrepreneurs.
The first fully built-up private estate development to be successfully delivered in in Lagos was The Atlantic Beach Estate and the success of this development highlighted the potentials and suppressed demand for medium to high income housing in the Lagos metropolis.
This encouraged the likes of the UAC group to venture fully into real estate development with the much acclaimed Goshen Beach Estate. Following the delivery of the Goshen Beach Estate, the option of acquiring good quality properties from private developers had been fully established and from around 2001/2002, several large scale real estate developments such as Carlton Gate, Northern Foreshore, Lekki county, Ocean Bay, Buena Vista, Mayfair Gardens and the like were conceived and delivered in varying stages of completion. This development was a signpost that the pendulum had swung firmly in the direction of property acquisition through purchase rather than through construction and the era of ‘Properties for sale in Lagos’ had fully arrived. The purchase trend has now more or less become the norm amongst middle income Nigerians seeking to purchase property in the Lagos area and we have witnessed the influx of a great number of ‘developers’ into the property market in the past decade especially along the Lekki Axis.
To Buy or To Build – Determining what works best for you.
As observed much earlier, though the preponderant mode of acquiring property now seems to be through purchase, there still remains a significant percentage of persons 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 – Either fully completed or off-plan
- This is the ideal option for anyone who wants a more or less typical house without any features that are specific to his/her tastes/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.
- Thirdly, for someone with a specific budget and not willing to take the risk of possible price fluctuations or variations that usually occur during 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
- Looking at the other side of the coin however it is evident that 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 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.
- 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.