A new report by a Lagos-based real estate firm, Octo5 Holdings limited has revealed that the fundamentals of the Nigerian economy remain good for real estate investment despite increased insecurity and lack of effective management of fiscal systems.
The report, which critically examined how inflation, naira devaluation and high exchange rate impacted the real estate, claimed that real estate investments remain the most effective hedge against devaluation of naira on personal income and wealth.
The firm, in its 2021 quarter four Real Estate Report, indicated that the construction sector grew by 3.70 per cent in quarter two of 2021 from 1.42 per cent in 2021, while inflation grew at the rate of 16.63 per cent, real estate services in nominal terms in quarter two of 2021, it stated is about 7.38 per cent.
It states: “The realities of the Naira devaluation on everyday Nigerians continue to bite. However, many households and businesses have seen a huge spike in the costs of goods and services, which has taken a toll on disposable income which many Nigerians can save or invest.
“Prior to the devaluation, the Naira was officially trading at N379 to a United States dollar; post-devaluation, the official Nigeria to dollar rate became N410.25 to $1.”
“We believe that this is the time to invest, especially in Lagos and Abuja markets. For those with access to FX earnings, we believe that it is a bet worth considering for the long-terms.”
“The volatility in the foreign exchange regime means that with smaller dollar sums, you can buy significant assets below value, especially in the middle market sector with massive unmet demand. Inflation increased by 4.23 between May 20 and October 21, 2021 while the value of a two bedroom apartment in Heron’s Beak, a real estate project increased by 80 per cent during the same period.”
According to the report, investors can take advantage of foreign exchange fluctuations to invest with a long-term focus in assets around the Lagos and Abuja axes.
Speaking on the report, Chief Executive Officer, Octo5 Holdings Limited, Mr. Jide Odusolu, said true economic freedom comes from making smart investment decisions.
He further said real estate investment could help more Nigerians unlock wealth creation. Citing its soon-to-be completed Heron’s Beak apartments as an example, he said early investors who had purchased two-bedroom flats for N20 million when the project started in May 2020 would have seen their investment grow by whooping N16 million in one-year.
He said: “This is because the same two-bed units now sell for N36 million. This shows that despite the naira devaluation and attendant inflation, the initial investments have not only remained solid but have increased in value by over 60 per cent.
On her part, the planning and research analyst lead at Octo5 holdings, Adewole Adetoun said: “Real estate investment remains good protection against the high inflation rate and has proven to be resistant to erosion of value. Our philosophy is summed up by the conviction that a smart investment made at the right time will always appreciate in value.”