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Blame Inflation, Global Crisis On Rising Cost In Real Estate 

Posted by propertyapp on September 23, 2022
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Jide Adekola is the Group Managing Director of HomeWork Group Africa, he speaks on why real estate would also be productive and how global disasters is affecting the market and how house agents and tenants can find common grounds in meeting their demands and supply.

Real Estate is now the new oil, what’s your take?

Real estate is and has always been a source of wealth creation and a sure vehicle for the transfer of wealth from generation to generation . 

It is real, it is tangible and it doesn’t depreciate if selected strategically.  

Unlike other wealth creation sources. Real estate has been one of the most consistent. 

In Nigeria generally, it is the typical store of wealth as the opportunities and potentials are enormous. 

Even in prime areas that are fully developed. After some years they begin to undergo redevelopment and the cycle goes on.

Looking at most other financial instruments. We are in unpredictable times where these instruments such as forex trading, stocks, treasury bills and the likes are certainly unstable and pretty volatile. 

To this end, even financial institutions are scampering for real estate deals to stay in business. 

In this current times there is even more interest in smaller residential units like studios, 1 bed and 2 bed developments and this has made it easier for individuals to launch Unto the property ladder earlier and faster . 

In Dubai for instance, in order to reduce their reliance on oil many years ago, the leaders decided to focus on real estate as an alternative option and the rest is history. 

They have transformed the entire city and still doing so at an alarming rate creatively encouraging even foreign investment in real estate  .

In Nigeria we have these opportunities clearly as oil many years ago was booming and a major source of foreign exchange earnings in the 70s. 

Unfortunately our reliance on oil was enormous while there has been mismanagement and misuse.

A solid source of wealth creation and economic development that has stood the test of time is and has always been realestate. 

Growing even now at an alarming rate, real estate has served as source of passive income and this is the best time to participate in this cycle. 

Either as investors, home owners, vendors, consultants, suppliers, contractors, agents  or generally creating a source of generational wealth creation.

There’s a cause for concern with the cost of properties; rent and owning, why is it that bad?

Several reasons cause this and it’s important we do not ignore certain global events. It is funny how what happens in the world generally can affect us in a granular manner.

Examples are: 

1. The war between Russia and Ukraine 

2. Elections season in the country 

3. Devaluation of the Naira 

4. Inflation ( Global ) 

5. Insurgency & insecurity 

All these affect generally the cost of purchasing real estate and as a result naturally filters to increase in rent. 

For example, once there is inflation it automatically affects the price of building materials and labour at all levels. As a result this automatically affects the cost of creating the product and ultimately the price for purchase as Developers also need to make a profit. Obviously as a roll out of all these, rental cost surely increases as well as the cost of living and managing the facilities.

Lagos govt once advocated for monthly rent, what do you think about this?

Monthly rent has been sustainable in developed countries as there are solid policies that both support the tenants and protect the home owners/land owners.

For Lagos state. I believe we are ready (in certain locations) compared to other states but economic hardship currently might cripple the initiative affecting more the land lords . 

Critical areas of concern and workability are :

1. Due diligence on tenants (for landlords)

2. Legal framework 

3. Insurance 

4. Property maintenance/management 

5. Design (more flexible designs , easy to split and multi room spaces)

What is HomeWork Group Africa contributing to affordable homes?

Affordability is defined in different ways to different people. At homework we term affordability as creating products in particular locations making the pricing affordable within that cadre, be it a highbrow are, middle level or even low cost. 

We creatively look for ways to effectively bring real estate products to the level of the average Nigerian. Through design, construction methods, value engineering, partnerships, investment models, sustainability  etc. 

Affordability can simply be creating an opportunity for an ordinary Nigerian to participate in real estate investment as a part of a whole.

Fractional ownership co-investment, co-ownership, design, delivery of smaller unit prototypes and deliberate partnerships that allow us get rebates on land are all areas we at homework are looking at to achieve this fit.

It’s difficult in this economic climate but that is what induces creativity.

What are your plans to ensure Lagosians, Nigerians get affordable homes? Agents have made it almost impossible for tenants to get affordable homes, what do you think can be done?

Agents are a critical conduit in bringing a solution by linking potential/budding home owners and tenants with property developers and land lords. 

They help to filter information through a pool of other agents in linking a willing buyer/tenant with a willing developer/landlord. 

However there has been deep contamination in the system where professionalism and due deligence has throughly depleted. 

Though lucrative and a source of living to many. A lot of agents do not look at the true interest of the buyer or seller but look more into selfish interest. 

It is essential that one scans through the real needs of the tenants/buyers and effectively search and advice with true knowledge of the subject matter.

I will implore agents to be more professional, get training and truly understand the value they offer but add some form of uniqueness to it. 

If they focus more on value. The sky is just the beginning.

Jide Adekola, GMD, HomeWork Group Africa 

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