Nigeria's Luxury House Markets Rose In 2021, Record Increase In Sale Prices
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The Nigerian luxury real estate market is benefiting from an influx of wealthy individuals looking to expand their portfolios by purchasing multiple residences.
As a result of the COVID-19 pandemic’s impact last year, many in the working class perceived the need for better homes with access to facilities that enable Work From Home (WFH) regulations, the luxury residential market grew.
Consistent electricity and internet connectivity are examples of such facilities. Furthermore, rising insecurity has prompted many people to seek safer neighborhoods within gated communities.
The depreciation of the naira against the dollar has made house purchases more affordable for individuals in the diaspora, resulting in a rise in demand and an upward influence on the price of housing.
Stable electricity and internet connections are examples of such amenities. Furthermore, rising insecurity prompted many people to seek safer neighborhoods within gated communities.
The depreciation of the naira against the dollar has made property purchases more accessible for individuals in the diaspora, resulting in an increase in demand and an upward influence on the market.
According to Knight Frank Nigeria, sale prices in Port Harcourt, Abuja, and Lagos increased by 10% to 12% across the city’s finest neighborhoods.
“The motivations for price increase include adequate security and power supply as well as the quality of houses in these areas.
In 2022, Knight Frank anticipates a gradual increase in the demand for prime real estate, but not necessarily the super luxury class. “An expanding middle class desirous of quality housing will fuel increase in demand,” Chief Executive Officer, Knight Frank Nigeria, Mr. Frank Okosun said.
“As long as the offerings continue to match the expectations of the home purchasers, demand will remain sustainable. The growth of this demand is likely to be muted by the state of the wider national and global economy,” he said.
Despite the country’s suffering economy and general discomfort, overall market activity in various residential sub-asset classes remained high in the first half of the year, according to Dr. Samson Agbato, Director, School of Environmental Studies, Moshood Abiola Polytechnic, Ogun State.
According to Agbato, an estate surveyor and valuer, prices in Lagos and Abuja have increased by 25-30% on average. The short-let bubble and the millennial rule dominated the Lagos Island residential real estate market in H1 2021, for example.
“The increase in prices can be attributed to the all-time high price of land in prime locations on the Lagos Island (particularly in gated communities like Banana Island, Shoreline Estate, Cowrie Creek, and Pinnock Beach Estate).
“Fast-rising off-plan development activities, continuous rule of millennials, a short-let market bubble, an increasing number of off-market listings,” he said.
In 2022, Agbato said the residential real estate market would remain mostly unchanged from where it was in 2021 as fewer rooms will continue to be demanded in city centres as against four to five bedrooms.
“Short-term rentals will continue to receive upward reviews. Therefore, developers will make every effort to meet the highest possible standards in their projects, and some transactions will be completed for much more than the asking (and market) price, even though few ones may close for undisclosed sums,” he said.
Journalists learnt there was “unexpected increase in demand for luxury homes,” while wealth creation also played a big role in driving price and demand growth in 2021. There were five million new millionaires in the world in 2021, according to the yearly Knight Frank Wealth Report.
This newly generated wealth led more buyers to make real estate investments of varying kinds. “Access to technology and the digital democratisation of investments, including private equity, have led to greater levels of wealth creation and growth. This is something that will gain momentum over the coming years,” the report said.
Meanwhile, Dubai saw the biggest gain in luxury-home prices of any major global city in 2021, as values around the world increased, according to a new report.
The increase in demand and rise in prices across 100 major hubs for luxury real estate were fueled by many factors including low mortgage rates, shifts in lifestyle choices due to the pandemic and more flexible working patterns.
Dubai led the list with a 44.4per cent increase in high-end sale prices from December 2020 to December 2021, according to the report.
AIHS 2022
“The U.A.E’s handling of the pandemic, strong take-up of the vaccine, the delivery of high-end turnkey projects as well as innovative new visa initiatives and economic reforms, have together boosted Dubai’s profile in the eyes of international buyers,” said Kate Everett-Allen, head of international residential research at London-based Knight Frank.
In the Middle Eastern city, sales above $10 million have historically accounted for two per cent of all transactions but in 2021, they equated to seven per cent, according to Ms. Everett-Allen.
Moscow was in second place with a 42.4 per cent yearly change, mainly due to Russia’s mortgage subsidy programme and tight supply, the report noted.
The next three spots were filled by U.S. cities: San Diego, California, with 28.3 per cent, Miami with 28.2 per cent and New York’s Hamptons with 21.3 per cent increase in luxury home prices.
“We are seeing increasing interest in both indirect exposures, by way of real estate investment trusts for example and direct investment in physical real estate, especially as a hedge against potential inflation,” Pierre-Yves Lombard, managing director and deputy head of private banking at Lombard Odier for the Asia region, said in the report.
The luxury housing remains on track for another boom year in 2022, according to experts.
“Dubai, Miami and Zurich lead our 2022 forecast, with prime prices expected to end the year between 10per cent and 12 per cent higher. Asian cities are expected to trail slightly, but even here, prices will grow,” Liam Bailey, global head of research at Knight Frank, said in the report.
“Key themes to watch: Agents will complain about stock shortages, buyers will complain about rising taxes and cooling measures, and city markets will be back in demand.”
The world’s affluent population those with a net worth of more than $5 million grew by nearly 20per cent in 2021, according to The Report: 2022 Global Luxury Market Insights, produced by Coldwell Banker Real Estate LLC and the Coldwell Banker Global Luxury programme. In the U.S. alone, the wealth growth rates pressed even higher, rising nearly 25 per cent during that period.
As a result, luxury real estate is growing. The sales of single-family luxury homes, defined as the top 10 per cent of any given market, climbed nearly 15 per cent in 2021, and prices increased 20 per cent from 2020, according to the report.
“Stock market gains, rising home equity, increased savings and the cryptocurrency boom have all contributed to a massive expansion of wealth and the sheer number of affluent individuals across the globe,” says Michael Altneu, vice president at Coldwell Banker Luxury. “This combined with a renewed focus on home for fulfilling a range of needs from security, escape, community, work, and wellness has led to unprecedented demand for bigger and better homes in new locations. As a result, luxury is no longer concentrated in a few major cities; it’s everywhere and we’ll continue to see the growth of secondary markets for years to come.”
International buyers are expected to add to luxury markets, returning to U.S. real estate as pandemic-led travel restrictions loosen. About 83 per cent of real estate pros surveyed by Coldwell Banker anticipate international buyers coming back to the U.S. market. They believe foreign buyers will most be drawn to turnkey properties that offer additional space and privacy. Real estate pros also believe they will target secondary or suburban areas.
Secondary markets are becoming an increasing draw to the luxury market. For example, markets like Denver; Boise, Idaho; Sacramento, Calif.; San Antonio; Raleigh, N.C.; and Salt Lake City are seeing increasing interest from luxury buyers, according to the report.
“Work-from-home opportunities, climate change considerations, and accessibility to dream locations mean luxury may continue to expand throughout the country as consumers search for the home that best fits their needs and desires,” the report says.
Also, secondary home purchases are increasing as the wealthy add to their real estate portfolios. About 70 per cent of individuals with a net worth of $5 million or more own two or more properties. More affluent buyers also are purchasing getaway homes about 32 per cent in 2021, up from 23 per cent in 2020, according to the report.
“Double-digit wealth and affluent population gains have happened concurrently with a once-in-a-generation change in living patterns and migrations,” says Liz Gehringer, president of Coldwell Banker Affiliate Business and chief operating officer for Coldwell Banker Real Estate LLC.
“As luxury real estate represents a larger percentage of the total housing market than ever before, it is absolutely crucial that luxury real estate professionals have a firm grasp of all factors influencing wealthy buyers and sellers today. The agent has become the affluent buyer’s connection point to new locations around the world.”
