Why now is good time to buy in Nigerian, London markets

Like the once burgeoning Nigerian property market, the seemingly ever robust London property market has cooled, offering ample time and good opportunity for buyers/investors to move cash to the markets.

Whereas the London market has succumbed to several market forces, including the government’s stamp duty measures over the last 18 months, Brexit concerns, and the withdrawal of many foreign buyers experiencing their own domestic woes, the Nigerian market is struggling from the combined impact of the country’s slowing economy and the government’s anti-graft war.

The current market situation in London is quite intriguing and Onyx Real Estate, London-based property consultants, explains that in his Summer Budget and Autumn Statement of 2015, and the March Budget in 2016, the Chancellor introduced several new laws targeting property investors and second home owners.

These laws include the abolishment of mortgage rate relief when calculating the taxable rental income (in effect from 2020), a reform of the wear and tear allowance, and a Stamp Duty Land Tax (SDLT) rate – 3 percent above current rates – that now applies to all second home owners.

In Nigeria, government’s fiscal and monetary policies have more or less squeezed money out of the economy and this, coupled with the fall in oil price at the international market, has considerably reduced demand for property by both households and companies.

Onyx notes that while there was a rush to buy in the first few months of the year (Halifax bank reported that house prices increased 9.7 per cent over the year to February 2016) as investors took their “last chance” to buy before the new rates of SDLT hit from April 1, adding that the market has more recently seen a sharp drop— sales transactions jumped by 50 per cent in March, but have halved since April, and since April, SDLT for a second home worth £275,000 has risen from £3,750 to £12,000.

“As the prior example was on a purchase price figure that is rare to find in London, it is no wonder that landlords are being further deterred from adding to their property portfolios. Though the increase is significant, for those investors looking at a long-term arrangement, the new SDLT surcharge could be factored in and managed into profit margins over a 10-year plus period. Even more so if you take advantage of the current market and use the additional SDLT to reduce the purchase price of a property.

“You could even argue that these new charges are the consequence of short-term investors flooding the market, aiming to fix up a property and sell it on quickly at inflated prices, which would have deterred long-term landlords who have been priced out of a property which they could have owned in the first place. So, actually, if you are a long-term investor, you may already be at an advantage, as those who are in it for the quick buck will be put off by the returns on a short term investment.

In Nigeria, close market watchers say it is a buyer’s market that will take a long time to end, explaining that the challenge in the market is not going to go away any time soon and “going by my projection, I don’t see the market getting a rebound any time before the end of next year”, says Ogini Ojeme, an estate manager and property consultant.

According to him, those who want to buy must buy now because after now, properties are going to be expensive and this is because supply is already shrinking because not many people are building.

Chudi Ubosi, Africa president of the International Real Estate Federation (FIABCI), advises that those who want to buy should go for foreclosed properties “because they make more economic sense”.

Fear of Brexit has certainly curtailed many buyers, particularly those abroad, from purchasing property from the UK market as uncertainty looms regarding what life outside the EU will look like. However, there is an advantage to those foreign buyers, if they were to buy now. Outside the EU, the UK could become even more attractive in its exclusivity, while continuing to offer the unique culture, an excellent education, and legal system stability that currently makes it so appealing.