Today, it is possible to invest your money in different types of investments. These can be in stock markets, bonds, cryptocurrencies, works of art, life insurance, funds, and real estate. But real estate still represents one of the safest investments of our time. So why invest in real estate in Nigeria? We’ll show you 7 reasons to invest in real estate in this article.
Benefits of Investing in Real Estate in Nigeria
1. No risk of inflation
If ₦5 million naira can get you a particular piece of land in a specific location this December, by next December, you’d probably need an additional ₦3 million naira to get the same property.
Two things are involved here:
- Inflation
- Increased value of the property
As a rule, real estate does not lose value. It’s quite the opposite. With real estate investing, you can be fairly sure that your money is preserved in an inflationary environment like ours.
Again and again, it happened in the past that the money was devalued by inflation. The term inflation comes from economics and describes an increase in consumer prices. The price increase can be caused by a change in the exchange ratio between the quantity of goods and the quantity of money if the quantity of money increases without the production of goods increasing at the same rate.
In Nigeria, we unfortunately have a comparatively high year-on-year rate of inflation. The creeping devaluation eats up assets every year.
Some savings accounts or savings contracts often even post a negative return after deducting taxes and inflation.
Owners of real estate step down against this situation. In the case of financing an estate with borrowed funds (loans), inflation even reduces the repayment of the loan. The loan value with interest rate stays the same while the value of the invested property shoots up.
2. Real estate increases in value
Real estate ownership is one of the mainstays of tax-free wealth accumulation. However, in Nigeria, real estate properties only attract 0.3 to 0.7% taxation annually – 0.3% for recreational properties, 0.4% for residential properties, and 0.6% for commercial properties. This is really low compared to, for example, the 35% duty fee you have to pay for a car to get to you from abroad.
Not only the classic home but rather the rented real estate such as residential properties, apartment buildings and condominiums are excellent capital investments.
Only real estate offers a high level of security, protection against inflation, low or no tax benefits, returns and a source of income in old age.
Those who invest wisely here not only get a good return from the rental income but can also look forward to an increase in value.
The real estate market in recent years has shown that houses and land are increasing in value. For example, our landed property at Greenville Estate in Lagos saw an increase in value of ₦2.5 million to ₦4 million naira per plot within two months after its launch. This means investors who got a plot for ₦2.5 million in October 2022 gained added value of ₦1.5 million on their property in less than a month.
With real estate, you are in control of how much the value of your real estate actually increases. So there are estates and metropolitan areas that will grow strongly in the future.
Our experts are currently predicting that the following areas will have a particularly strong increase in value within the next 10 years:
– Epe, Lagos State
– Ibeju-Lekki
– Ikorodu
The reason is due to their proximity or their location in areas with ongoing and planned public and private infrastructures which will definitely increase the values of real estate properties in the areas.
3. Your retirement savings
A real estate investment in Nigeria is the perfect retirement plan. The statutory pension system is no longer sufficient to maintain your standard of living in old age. Owning real estate brings continuous rental income or accumulated value and thus secures your income beyond your professional life.
If you start investing in real estate at a young age, you will be debt-free in old age. You’ll have a property that you do not have to pay rent for. There is often a supply gap that you can bridge with a real estate investment. This can be third-party investments, rentals or sales.
However, frequent shifting of capital investments leads to a reduced return. This is due to the transaction costs on the one hand and the difficulty in finding the right time to enter and exit a market.
An investment in real estate should therefore always be considered in the medium or long term. Financing should also be coordinated with your goals and time horizon.
4. Independence from monetary policy
A real estate investment lets you sleep peacefully because you don’t care much about political decisions.
If you’ve ever invested in stocks or cryptocurrencies, you know how devastating even small political changes can be to stock prices.
The monetary policy of the Central Bank of Nigeria (CBN) is still particularly favourable for buyers of houses and apartments. Interest rates are currently high (recently raised to 16.5%) but by investing the money on a real estate property in a prospective location, you can have at least double your interest rate in a year.
People who finance their houses and apartments through bank loans therefore usually gain thousands or millions of naira. To service an ₦10 million loan, for example, the borrowers would have to pay back ₦11.65 million. Meanwhile, investing in a two plot of land at Greenville Estate Epe, Lagos State (₦8 million as of December 2022 with the balance spread over land documents) will definitely give you a return that is at least 50% higher than the invested value in a year.
A real estate investment is therefore always a profitable investment independent of decision-makers in politics or business.
5. Tangible assets can be inherited
With an investment in real estate, you can later leave the house, apartment or property to your heirs. Then you can have a good feeling that the inheritance really remains valuable, which will certainly make your descendants happy.
Being able to pass real estate assets on to one’s children is certainly a goal worth striving for.
The property is connected to you after your death and reminds people of you. Meanwhile, a large sum of money in the bank is impersonal. And even if you decide to give cash inheritances, gifts, or donations, after a while nobody remembers that the money came from you.
6. With real estate you have more financial leeway
If you already have one or the other partially paid-off property, you can secure much better conditions with the bank when financing a new property investment or your own home. Financial institutions offer you numerous possibilities and options when structuring your loan.
A customer who has already sought loans for years with his bank is certainly a welcome contact person for further investments and financing. Moreover, you often get even more favourable conditions.
If you get into payment difficulties, the bank can access the property and use it to pay off the debt.
7. Independence from your landlord
Every tenant has had trouble with their landlord at some point in their life. There are many points where opinions differ and arguments ensue: The heating is switched on too late, the roaster is not observed, the lawn is not mowed in time, or, or, or.
These problems do not exist in your own four walls and the homeowner can start the day relaxed because he knows that nobody can dictate to him in his own home.
But note that in the case of residential property where you are the landlord, you may have trouble with the tenants.
However, owning your own property is always an advantage, as you have the power to make decisions here.
