Gbenga Olaniyan is an estate surveyor, valuer and principal partner, Estate Links Limited. He spoke to CHINEDUM UWAEGBULAM on issues in the housing industry, especially as it pertains to agency practice, property investment and housing finance.
The infiltration of quacks has done great damage to real estate profession. How do the industry players tackle the issues of perception and branding of estate agency practice?
The Nigerian Institution of Estate Surveyors and Valuers is doing a lot about this. The first thing is with regards to training of its estate surveyors and valuers. One of the strategies the institution is deploying is to ensure that a lot of trainings are done and when these trainings are done, best practices are imbibed in the heads and minds of people. Another has to do with the estate surveyors themselves, as we need to differentiate ourselves by our practice and the information we pass to people. For instance, when you are advising someone who wants to buy an investment, you need to tell him what his yield would be and not only the price, as you are not selling him a house, you are selling him an investment. You need to let people know that there is a difference between the professionals and the quacks; you need to let them know what your background training is. For those of us, who are valuers, we are the only ones who are allowed to do valuation, so the public of course needs to be educated and sensitized to the fact that quacks cannot legally perform functions in some parts of our profession. In a nutshell, while our institution is doing a lot, individual practitioners have to ensure that they do their own branding and differentiation.
The real estate sector is facing tough times due to economic downturns, leading to low purchasing power. What are the options available to property owners and agents to curtail high vacancy rates for residential and commercial property?
I will talk about commercial properties first. For so many commercial properties, especially the A grade and high-end commercial properties, one of the practices that professionals now do is that we give fit-out allowances that we never used to give and this would attract tenants who normally would not leave old properties to move into your property because the cost of moving is reduced. We also attract tenants by allowing rent-free periods where this flows with the financial projections for the property. There are some properties where we actually give tenants as much as six months rent free so that it gives them enough time to settle in. Another way is to drop rents until the market turns around. I remember in one of the properties we manage where a tenant was paying a rent of N8, 000,000, the tenant then told us he was moving out because business was bad and then we asked him what he could pay, he said N5, 000,000. We negotiated N5, 000,000 for the next year and when he had a turnaround he went back to be paying N8, 000,000 with this we were able to avoid a void period. The high vacancy rates in the major business cities such as Lagos, Abuja and Port-Harcourt for instance is mainly at the high end of the market so landlords have started becoming more realistic dropping rents as a calculated strategy in lean times.
Many reputable developers and agents are eying foreign property investments and marketing. What are strategies to adopt in property investments abroad? What are legal implications for would be investors?
We have done a lot of this and we have been fortunate enough not to meet people who have stolen money. Lots of our buyers are regular people who have done well and who want to invest funds like $100,000 and $150,000 which is the entry level for investors in most countries where we operate. For people who want to do volume in this, they need to look into locations where you have low hanging fruits where they are able to buy properties that are inexpensive and easy to rent out, which would be the lower-medium income end of most markets. These properties tend to give you high returns with long-term capital appreciation potentials. The other option of course is that you need to also work with banks to tap into the power of leverage in real estate. For instance, we work with banks that give up to 70 per cent loan to value ratio so if you are looking to invest abroad there is an opportunity for foreigners to take mortgages. Talking about the legal implications, in most countries, especially the four main countries Nigerians generally invest in as far as I know (United Kingdom, United States of America, South Africa and United Arab Emriates), any foreigner can own a property. We however recommend that anyone who wants to invest abroad, especially in a society like the United states of America, where it is easy for someone to be sued even because someone falls at your doorstep because of ice on your stairs, it makes more sense to invest using a special purpose vehicle (SPV) for protection.