Investing in luxury real estate is generally considered a smart financial decision for individuals who want to grow their wealth while enjoying the luxury and comfort that comes with owning a high-end property. In Nigeria, the luxury real estate market is growing, and investors are taking advantage of the opportunities it presents. In this article, we highlighted the few guides to investing in luxury real estate in Nigeria, including the factors to consider and benefits of investing in the Nigerian luxury real estate market.
Key Factors to Consider Before Investing in Luxury Real Estate in Nigeria
Investing in luxury real estate in Nigeria requires careful consideration of several factors to ensure that you make a wise investment decision. The market has seen several foreign investors entry in the last 2 years, construction of commercial and retail developments are on the rise, the housing deficit weighs heavily on the purchase and rental cost of residential properties and property developers are optimizing for space and churning out more shortlet apartments. Here are some factors to consider when considering an investment in Luxury real estate in Nigeria.
- Location: In real estate, location remains the primary factor to consider, and key commercial districts are generally considered as top priority. We advise considering locations in areas that are in high demand, have excellent infrastructure, less traffic congestions and offer a high quality of life. Some of the areas to consider include Victoria Island, Ikoyi, Lekki, Banana Island, and Eko Atlantic City in Lagos State, Garki, Jabi, Maitama, Asokoro and Gwarimpa in Abuja, and Old GRA, New GRA, Peter Odili Road, Ada George and Eagle Island in Port Harcourt which are Nigeria’s top commercial states.
- Developer Reputation: Before investing in luxury real estate in Nigeria, you should research the reputation of the developer and never invest in properties developed by reputable developers with a proven track record of delivering high-quality projects. A few points to consider are; how many years the developer has been in business, their project portfolio, the quality of existing developments, the percentage of the market share they control, etc. In any case, doing a bit of research should provide you with basic information on the development company to enable you decide if they can be trusted to deliver on your investment.
- Price: The price of the luxury property is another critical factor to consider. Not necessarily the amount charged for the property but rather the perceived value for money. The price of a property is usually factor the location of the property, property type (e.g. Duplex, Bungalow, Condominium), the number of bedroom and the total living space. Conducting a quick search on a listing website like Nigeriapropertycentre or Propertypro.ng should give you an idea on the market price of different property types in your preferred location. As a point to note, you should invest in properties that are reasonably priced and offers a good return on investment.
- Amenities: The amenities that come with the luxury property are also essential and play an important role in the cost of the property. Amenities like Swimming Pools, Gymnasium, Spas, Security systems, Kids playground and reception service are usually offered in communities that houses several residents within an enclosed space e.g. a closed estate or Skyscrapers. While amenities like access to clean water, electricity, car parking spaces and good road network are amenities that are considered basic and should be available regardless of whether the property is considered luxury.
- Legal Documentations: It is extremely important to ensure all legal documents of any property you are purchasing are in order before investing. A few documents to review may include, but are not limited to, the certificate of occupancy, the Deed of Assignment/Governors consent on the property, the survey documents, the approved building plan etc. We advise you seek the services of a legal professional in assessing these documents to confirm their authenticity and relevance to the property you are purchasing.
Benefits of Investing in Luxury Real Estate in Nigeria
If done properly, investing in luxury real estate in Nigeria has several amazing benefits to the average investor. This may include:
- High Potential Returns: Luxury properties in Nigeria can offer high rental yields and strong potential for capital appreciation over time, especially in desirable locations such as Victoria Island, Ikoyi, and Lekki in Lagos. With an increasing demand for luxury housing in these areas due to their proximity to business centers, shopping malls, and other amenities, investors can potentially earn high rental income from their properties. Additionally, Nigeria’s growing economy and rising middle class make it an attractive location for property investment, with a strong potential for capital appreciation over time.
- Diversification of portfolio: Investing in luxury real estate can offer diversification for investors who have portfolios heavily weighted towards stocks or other asset classes. This is because real estate investments tend to have low correlation with other asset classes, meaning that they can help to balance out a portfolio and reduce overall risk.
- Hedge against inflation: Real estate investments can provide a hedge against inflation, as property values and rental incomes tend to rise over time along with inflation. This can be especially beneficial for long-term investors who are looking to protect their wealth and maintain purchasing power over time.
- Tangible asset: Luxury real estate investments are tangible assets, providing a sense of security and stability for investors. Unlike stocks or bonds, real estate is a physical asset that investors can see and touch, which can provide a greater sense of security and stability during times of market volatility.
- Foreign investment opportunities: Nigeria’s growing economy and increasing international exposure make it an attractive location for foreign investors looking for profitable investment opportunities. In recent years, Nigeria has seen an influx of foreign investment, particularly in the real estate sector, with investors from China, the UK, and the US all showing interest in Nigeria’s luxury property market.
- Lifestyle benefits: Luxury real estate investments can offer lifestyle benefits to owners, such as access to exclusive amenities, high-end finishes and design, and desirable locations. This can be particularly appealing for investors who are looking to use their properties as vacation homes or as a way to enjoy a luxury lifestyle.
- Favorable tax laws: Nigeria has a favorable tax environment for real estate investors, with tax incentives available for property development and rental income. For example, investors can claim tax deductions for expenses related to property development and management, which can help to reduce their overall tax liability.
However, it’s important to note that investing in luxury real estate also carries risks. These risks include market volatility, economic instability, potential regulatory changes, and risks associated with property development and management. Investors should carefully evaluate these risks and conduct thorough due diligence before making any investment decisions. Additionally, investors should work with experienced real estate professionals who can provide guidance and advice on navigating the Nigerian property market.