Real estate investment: Asking the right question

In a recessive and challenging market such as the one in Nigeria today, real estate buyers and/or investors usually have the lead in market transactions because it is ‘buyers market’. But that does not mean that they should walk into a transaction by accident or unprepared.

The Nigerian economy has been in doldrums in the last 12-18 months and one of the indicators of how bad it has been is real estate sector. The economic recession has affected many key sectors of the economy including oil and gas, financial and manufacturing sectors, leading to low industrial productivity, income reduction and job losses.

Nigeria’s official unemployment rate jumped to the highest level in, at least, seven years in the third quarter of last year. While cost-push inflation in the country slowed in February this year from a record high of 18.5 percent a month earlier to 17.8 percent, it is still almost double the central bank’s target.

These developments have impacted the real estate sector in a very significant way as personal and household income which has diminished considerably from job losses and pay cuts, has reduced buying power of those who would have needed homes.

However, close market watchers say they have begun to see very early signs of what they call “cautious recovery”. Udo Okonjo, Fine  and Country’s CEO, explains that the recovery is cautious because it has to be sustained to be referred to as recovery.

“If the inflation rate continues to drop, if the naira stabilizes, and the ambiguity and uncertainties are removed from the environment, once these factors are in place, then we are pretty confident that towards the third, fourth quarter of 2017, we should definitely begin to see actual recovery”, she hopes.

She advises that prospective real estate buyers should search the internet for listings, inquire with a renowned property manager or agent and also check the daily property newspapers to gain insight on a particular location, property type and average asking prices.

“There are good sources, especially websites of big and reputable property vendors, and many others. As a buyer, one of the objectives of asking questions before investing in real estate is to get to know the price range for the location one wants to invest in order to ascertain what is excessive and what is considered low. This investigation will help the investor to make a reasonable bid and also provide the first perception that there is bargaining room on a particular property”, she says.

There are still other questions buyers should ask and Okonjo says these should border on title, developer history, documentation fees, year of construction, facility management, service charges, transfer of ownership, etc.