Price correction sluggish in property market as developers insist on pre-recession values

Price correction in the Nigerian property market has remained sluggish contrary to expectations that values, which reached dizzying heights during the boom days, ought to have hit the bottom by now after the 2008-2010 crippling economic recession.

Close watchers of the property market explain that this situation, which has also made the market very dull, has persisted because developers and investors alike are still under the illusion that recovery would happen the next day, hence their strong hold on pre-recession prices.

Between 2006 and the last quarter of 2008, Nigerian property market recorded unprecedented value appreciation fuelled by slush cash from newly recapitalised banks and bubbling stock market.

“I see a market that is ruled by emotion; most of the developers are so emotionally attached to their property that they don’t want to let go, hoping that they will get a better deal tomorrow,” Chike Muoguilim, CEO, MTS Property Development Company, told our correspondent.

According to him, the reality that seems not to have dawned on some developers is that values have come down and will hardly go back to the pre-recession days when values appreciated by as much as 100 percent in 18-24 months.

Bismarck Rewane, CEO, Financial Derivatives Limited, in one of his quarterly economic reviews, noted that Ikoyi and other highbrow neighbourhoods in Lagos have seen vacancy rate as high as 30 percent.

A recent survey of the Ikoyi market by our correspondent corroborates this, as a walk through the avenues and roads in this exclusive settlement reveals that in addition to new buildings coming to the market, a good number of the old homes are empty with ‘to let’ or ‘for sell’ tags on them.

At Parkview Estate, for instance, it is discovered that at least two houses in almost each of the roads and avenues carried ‘to let’ or ‘for sell’ tag, while on Bourdilion through Alexander to Gerard roads, construction activities on high-rise buildings are upbeat while many completed ones are empty.

At Osborne Foreshore Phase 1, there are still empty parcels of land with outrageous price tags. Here, 3,000-square metres of land goes for a net price of N500 million, while another parcel of land measuring 1,200-square metres sells for N260 million net.

In Banana Island, touted as the most upscale settlement in Lagos today, the story is not different as one can still get large parcels of empty land going for head-swelling prices. A 1,000-square metres of land in this neighbourhood goes for between N250 million and N300 million.

On Gerard Road stands newly completed Admiralty Court comprising well finished luxury apartments, each of which goes for about N260 million – one of the most expensive in town at the moment.

By: Chuka Uroko