Market News

Exchange rate volatility creates naira, dollar ecosystem in premium real estate - BUSINESSDAY

JUNE 24, 2022


The impact of exchange rate volatility in Nigeria is spreading across sectors such that in real estate, it has created what experts call ‘naira and dollar economy’ in the premium segment of the market.

In Ikoyi, Banana Island and Victoria Island, which are home to premium real estate, there is an increase in tall structures in the pipeline, under construction, and nearing completion and each development falls under the dollar or naira economy.

“Due to the fluctuation around the naira, there is a dichotomy between naira and dollar initiatives, with the result that intelligent investors tend to drift towards the dollar economy in order to enhance their return on investments,” Udo Okonjo, CEO, Fine and Country West Africa, told BusinessDay.

Okonjo noted that working with naira-based projects was dangerous for investors, especially in the elite luxury market. She added that top developers in the luxury real estate business have been sticking with the dollar economy in the past five years.

In the luxury real estate market, there are micro divisions that are sometimes referred to as affordable luxury real estate. Developers in this segment, according to Okonjo, frequently work in the luxury real estate naira-based sector. “Despite being tall buildings, these constructions are priced in naira and range in height from 8 to 12 storeys,” she said.

She pointed out that the more complex the construction and the investment necessary, the higher the cost of the building, which is reflected in the pricing, disclosing that average residential space prices in the luxury segment range from $2500 to $4500 per square metre, with more affordable options falling somewhere between $2850 and $3500 square metres. The more exclusive spaces, such as the penthouse, cost around 4500 per square metre and up.

Unlike other house-types, the development of luxury real estate takes time which is why Okonjo said “desperation does not fit with luxury.” She said that developers of luxury real estate are willing to wait and collaborate with their intended/target audience. “The delivery time frame for these developments is typically 4–7 years,” she noted.

Okonjo listed a few things potential buyers and investors in luxury real estate ought to know about that exclusive market. According to her, the luxury real estate market is often reserved for long-term investors, adding that industrialists, financial institutions, and some corporations that have capital in the country that is dedicated to the Nigerian market are among these investors.


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