Real estate value firms up as banks slow down in foreclosure




In spite of the generally acknowledged real estate volatility, especially in Lagos, which interestingly appears to have subsided of recent, rents, fair enough, are still down – with rents in the low density areas sliding by 15 percent since March.


Experts believe the slow down in estate volatility is as a result of the reduction in banks’ foreclosure which has helped improve the liquidity position of the banks.Bismarck Rewane, chief executive of Financial Derivatives, acknowledged this, when he agreed that sales value of houses have firmed up as banks slowed down in their foreclosure. Rewane for instance, observed that, as of May, flats went for as much as $50,000 or N7.5 million per annum in Victoria Island, $65,000 or N9.75 million per annum in Ikoyi and N3 million per annum at Lekki.


Flats for sale in Victoria Island, he recalled, went for N75 million in May and N100 million in Ikoyi. Detached apartments in Victoria Island were sold for N300 million in Victoria Island and N350 million in Ikoyi. But the problem, experts noted, was that, only very few people or corporate organisations are showing interest, thus reducing effective demand.


For Olabode Afolayan, National President of Real Estate Developers Association of Nigeria (REDAN), the on-going reforms in the banking sector was responsible for the “new face” of the real estate business. Afolayan noted that the present reforms have weakened abilities of banks to provide essential services, especially the real estate, which requires huge capital injection.“‘Sincerely, we had looked at the banking reforms as one thing that would open up lots of opportunities for investors in the real estate sector, but honestly, in the last few months, it has been a very unfortunate situation”, he said recently in Abuja.


Afolayan lamented that since the banking reforms began, no meaningful service could be gotten from banks any more. The banks are now struggling to be in business, they are not investing any money. The reform has weakened abilities of the banks to provide essential services.Country Business Intelligence report on Nigeria by Oxford Business Group, recalled that, Nigeria’s high-end real estate market took off in the lead-up to the credit crisis, pushing property prices up 100-300 percent in 2008, while also hinting that a correction appears imminent.


Housing demand meanwhile, remains high, especially for low-income housing, but many developers are reluctant to slash their prices. Though banks have tightened their credit lending, a number of large, mixed-use real estate projects have been launched.The report estimates that an estimated 14 to 16 million units are needed to fix Nigeria’s housing deficit, which will require between N45 trillion and N50 trillion ($305 billion-$339 billion). It added that as fewer than five percent of Nigerians currently buy a home with credit, even as the government is looking to provide the Federal Mortgage Bank of Nigeria (FMBN) with more funds and encourage private mortgage firms.






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