The real estate sector has been buoyant in the last couple of years, with investors staking billions of naira in the sector and receiving a healthy rate of return, well above inflation. Experts believe the real estate boom will persist for sometime. Where then would be the best place(s) to look to for investment opportunities in this market?

If the latest population census is to be believed, the Nigerian population is growing at over 3% per annum. Even if you are sceptical about this census, most experts have put the population growth at over 2.5%. This means that within the next 30 years the population will double. Put differently, for every house and office that exists today, there must be another house and another office even if the GDP per capita stands still. And if the economy grows at anything like the rate over the past five years then it may take less than 10 years to double the offices and 15 years to double the housing (or certainly to upgrade the quality of it.)

This represents a major opportunity for property investors and is a tide that is likely to lift most boats. But for the smart investor average performance is never enough, so we have looked across the country and identified the markets that are most likely to outperform the average over the next 10 years.

We looked at the key drivers: population growth, overall regional economic growth, as well as the balance between private income growth and public expenditure growth. We also looked at the social issues in the areas and finally we looked at the historic performance. The result is the five cities that are likely to have the fastest rental and price appreciation over a 10-year horizon.

We considered government spending, especially on infrastructure, road development, construction, and we also spoke with realtors, surveyors and valuers and came up with the five cities that we believe are most likely to be Nigeria’s fastest growing cities in terms of real estate prices and opportunities. We came up with Lagos, Abuja, Port Harcourt, Calabar/Tinapa and Ibadan to have the fastest growing real estate markets.

Lagos
The population of Lagos is under dispute; the Lagos State Government accuses the Federal Government of misplacing 8 million of its citizens! What is not in dispute is the sheer scale of Lagos and its massive urbanisation and population growth over the past 30 years. Places like Festac, Ogudu, Lekki and many others, which were swamp lands in the early 70s, are now thriving population centres in their own right.

All reasonable estimates of Lagos population put it at over 13 million and many put it at closer to 17 million. It is obvious to all that the city boundaries are extending by several kilometers every year – in every direction!

As the Nigerian economy grows, Lagos is the clear winner and is likely to continue to capture a lion share of the growth in jobs. It is already home to the major ports, the headquarters of the financial services industry, and home to the head offices of 60% of the largest private sector companies. In addition, it consumes 40% of Nigeria’s electricity and 33% of Nigeria’s telephone conversations are originated in Lagos. This, of course, bodes well for everyone in the real estate industry.

Investors looking for appreciation in Lagos can follow a number of strategies. They can invest in areas that are on the outskirts of the city, or just outside the city but are in the path of the city growth. Price appreciation tends to be the strongest in these types of play.

Key areas on the outskirts of Lagos are Ajah/Epe axis – growth has gone down the Lekki road at a breathtaking rate. We expect the pace to continue as a second road is developed and as the new industrial and commercial centres are developed around the Lekki free trade zone.

The next strategy is to buy in established areas and look for a combination of appreciation and rental income. Following this strategy requires the investor to do their homework and choose areas that are most likely to appreciate. This should be based on: historic appreciation, attractiveness of the area, access to transport and amenities, access to jobs, etc. The key established areas on the Lagos Mainland include Ikeja and Surulere. The key established areas on the Island are Ikoyi and Victoria Island.

The final strategy is to buy into estates or areas that are likely to turn around. Lagos Island, for instance, which for many years had been in decline, is now experiencing significant new investment in infrastructure. Many investors feel that the island has seen its worst days and prices may again start to appreciate as business is attracted back to it. Many of the new estates in the Lekki area are also potential hot spots. But here again investors must be careful to choose estates that are likely to continue to be well managed, as the poorly managed ones are unlikely to command strong premiums in the future.

One of the great aspects of Lagos is that there is something available for every pocket. At the top end, a 1,000 per sqm piece of land in a high-income residential area such as Ikoyi, Ikeja GRA or Lekki would go for anywhere between N20 and N50 million. According to Chima Odibo, a surveyor and valuer with Ubosi Eleh, premium office spaces are between N6 and N8,000 per sqm. Semi detached and detached houses, bungalows and duplexes “you could get such for say N25 million to N60 million, depending on the finishing,” says Nnaemeka of Nnaemeka Eze & Co. In the middle class areas of Surulere, Apapa or Omole you should budget from N10 to N30 million. But at the lower end of the spectrum prices start at N5 million.

Given the growing population, business growth and expansion and increasing property demand it is believed that the property market in Lagos will remain hot in the years to come.


Abuja
Has been growing at a rate of 9.4 per cent and currently has its population put at about 1.4 million. Although not as commercially vibrant as Lagos, its strength is that it is the seat of government. The movement of most federal government offices has influenced movement from other parts of the country to Abuja while the sale of government houses is currently drawing attention to real estate in the city. Abuja has grown at a breathtaking speed over the past 20 years (even when most parts of Nigeria were in severe recession). The question is, without industry how likely is it to continue to grow.

We believe that it will continue to push ahead for the next 10 years. Government is becoming more important, richer (oil prices are forecast to be higher over the next 20 years than they were over the past 20, whilst tax collection and management are improving, widening government’s revenue base) and better managed. This will trickle down into Abuja’s real estate market. There are two key strategies for investing in Abuja. Either buy into the city centre or buy into the satellite towns.

Buy into the city centre – even though it is getting scarcer there are still many empty spaces within the city. We believe prices will appreciate in these areas faster than expansion of the city borders. The establishment of satellite towns (and strong implantation of city planning) means that the city will not grow outwardly as rapidly as a city like Lagos or Port Harcourt.

Investors looking for commercial properties could look in the main business areas: Central Area, Maitama, Garki, Wuse, and Ademola Adetokunbo. According to a property consultant with Hilltop Properties, increase in trading activities has put pressure on demand for these properties.

High-income residential areas may be the places to look at. In places like Asokoro, Maitama, Wuse II, and Garki a 1,000 per sqm piece of land may go for between N12, 000 and N16, 000 per sqm. In the middle class areas like parts of Wuse Zone II, Utako, Areas I and II, and Garki I and II, the same piece of land could be sold for N9,000 to N11,000 per sqm. Developed properties in the high end areas such as bungalow, semi-detached or detached house, duplex, or a three to four bedroom flat may sell for N40 to N60 million. Rent for any of these properties stands between N2.5 to N5 million p/a in the high ends but between N1.5 to N2 million in middle-income areas, which command more rental income than the high ends.

The second strategy is to buy into the satellite towns (the prices are much lower) and if well selected yields are also attractive. We expect appreciation in these areas, perhaps not as fast as in the city centre locations. This means places like Kubwa, Nyan-Nyan, Mararaba, Karu, Jabi and their environs.

Port Harcourt
Despite the ‘security’ situation in Port Harcourt the rentals market has continued to power ahead. However, the resale market seems to be feeling the pressure of the militant menace.
Port Harcourt, with a population of 2.1 million, is growing at over 3.5% per annum. It is an oil city and as long as oil prices and output continue to surge ahead, the city’s property market is likely to remain hot. However, the security risk is likely to put off outside investors.

In addition to Chevron, Mobil, Shell and other oil majors, numerous oil services companies have their base of operation in Port Harcourt. And they are all expanding.

According to an estate surveyor with Universal Atlantic in Port Harcourt, many indigenes are returning to settle in the state, whilst non-indigenes are being attracted to the city by the strong employment market. Also, the policy of giving 60% of contracts to local contractors by the multinational oil companies is pouring wealth into the local economy. However, we do advise that you exercise caution. The militant activities are causing a build up of unsold inventory in Port Harcourt, as the security situation is putting off new investors.

Emma Wike, a valuer and surveyor who works and resides in Port Harcourt, believes that the resale market will pick up soon, especially if the incoming government can stop the menace of the militant groups. Okechukwu Ikejimba, a property consultant in Port Harcourt, sees massive returns on investment in the sector, with average rates of over 100% on some properties. He is of the opinion that such rapid growth will last for the next couple of years; with good and strong policies there is no stopping the oil city.
 
For investors in the high-end of the city, GRA Phase 1, 2, and 3; Old GRA; Aba Road; Ikwerre Road; and Kilometer 16 are areas you should be prospecting. Middle range properties are in the middle class areas like D-line, Rumuogba, and Rumudiakani where prices have risen by over 200% over the past three years.

Increased violence from Niger-Delta militant groups has encouraged relocation from other parts of the city, pushing up rental prices. The rent on a detached house in any of the high-end areas ranges from N3 to N4 million per annum, N2 to N3 million for bungalows, also per annum, N200,000 to N250,000 for single bedroom flats. Some landlords demand that payments be made in US dollars. In Trans-Amadi, where there are mainly luxury flats, a 3-bedroom duplex could be sold as from N25 million.

Calabar/Tinapa
Calabar real estate market has never had it this good. Over the past few years development and prices have grown more strongly than at any time in recent memory. Improved governance and increased revenues (13% derivation) are the key drivers. Many observers feel that now the wheel is moving forward, it is unlikely to be able to turn back.
Calabar has a population of 1.2 million and has been growing at about 3% in recent years. The key sources of jobs are oil, tourism, construction and increasingly industry (through the Export Processing Zone (EPZ)), whilst the key sources of its recent growth have been improved governance (residents report that the city is much cleaner and better managed), increased government revenues (13% of oil revenues derived from Cross Rivers State), and the export zone. Moving forward, it is expected that Tinapa, which is about 12km from Calabar main town, will become a new driver of growth.

Investors looking to catch the investment fever in the city can follow a number of paths.
The first path involves looking for properties close to the resort areas and the big bird, Tinapa. Smart investors are already taking advantage of this opportunity, so, properties in areas such as Eight Mile, the closest to Tinapa, have begun to appreciate in value. Another path is to go after the major business areas such as the Watt Market area, Calabar Road, NCC. These areas are likely to do well because they are the city's nerve centres.
 
If your interest lies in hospitality, NCC area is a good bet. There you would find the city's best hotels. According to a realtor with Gesh Henshaw Estate Surveyors and Valuers and residents in the city, Atimbo, Satellite Town, Parliamentary Area, Eight Mile, Apabuyo, Federal Housing, Ikot Ansa, Ekorinim, Idom Layout and Calabar town itself are the high end areas. These areas host the high and mighty of Calabar. With good facilities they dictate the pace of real estate in Calabar.

Of course, appreciation is also expected in the middle-income residential areas such as Main Avenue and its environs, Atu Street and Barracks area. The low-end areas are Anantitha, Duke Town and Calabar suburbs. Rented apartments such as 3, 4, bedroom flats, bungalows and duplexes could go from N400.000 to N1.5 million per annum in the high income residential areas, whilst a 1,000 sqm piece of virgin land can go for as much as N2 to N5, 000 per sqm. In the middle class areas, prices are lower, from N1,500 per sqm for the same size of land and about N500 per sqm in the low-income areas. There are speculations that when Tinapa finally takes off Calabar will be the cynosure of all eyes. So looking ahead there is much hope that real estate in Calabar is going to hit the roofs.

Ibadan
Although the ancient city of Ibadan is still developing, there is currently an upsurge in trade, commerce, job opportunities and construction, as banks, telecommunications companies and other private establishments extend their branch networks there. A surveyor with Jide Taiwo Estate Surveyors and Valuers is optimistic that Ibadan will be one city to look out for in the next couple of years. With a current population of 2.2 million and growing at a rate of 3.4%, an impressive real estate result in the last three years, especially in the last 12 months, realtors believe that growth in Ibadan will continue. Other Sources of commerce and industry include tyre rethreading, cigarrete manufacturing, agricultural processing, flour milling, leather working, and furniture making.

Investors interested in commercial properties may have to consider places like Dugbe, Challenge and their environs. According to realtors in Ibadan, demand is strongest from manufacturers who want to build factories in Ibadan. Demand for residential properties is also rising. At the higher end, Jericho, Iyadokun, Alalubosa, Bodija, Onireke, Idisin, Oluyole Estate and Agodi are residential areas worth prospecting in. Urban renewal is very much evident; around Oluyole Estate, new locations are opening up while old and abandoned buildings are being completed and put up for rent or sale.

Asking prices for 1,000 sqm piece of land in these areas are between N2.5 and N4 million, whilst developed buildings are attracting between N20 and N50 million. Rental prices of N800.000 to N2 million are typical. Other areas such as Ring Road, Liberty, Felele, Iwo Road, which make up the middle income region, could sell a 1,000 sqm piece of land for N1 to N2.5 million, and N300.000 in low-income residential areas like Tere, Apata, Eleyele, Ologbo, Eru, Sango, Agbowo and some parts of Iwo Road. Developed buildings in middle class areas sell from N10 million and above, depending on the size and attractiveness of the location. You will be able to rent these properties from N300.000 upwards. In the low-end areas, renting begins from N35,000, while developed sells from N5 million. Again, this depends on the type of property in question.

Property prices may not be as high as they are in Lagos and other big Nigerian cities, but they are on the increase, coupled with the general rise in cost of building materials. If government’s plan to restore the railway line from Ibadan to Lagos succeeds, business and investments opportunities will significantly improve. People can actually live in Ibadan and work in Lagos and vice versa. With the growing interest in real estate in Ibadan and expected returns put at 30% per annum, Ibadan is on its way to becoming one of Nigeria's hottest property market.

However, before committing money to real estate in these places it is important to speak with registered resident estate surveyors and valuers to get a feel of the area in question. After all, you don’t want to be swindled or to put money on a disputed property.