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What You Need To Know If You Are Investing In California Real Estate

California is always different, somehow always better or worse than the rest of the country.

This year there are two Californias. One that’s not much different than the rest of the country and one where real estate markets must be watched very carefully because home prices are getting into bubble territory.

We used data from Local Market Monitor, Inc. to build a table to show the split. The top half lists nine markets where home prices are 25 percent or more above the “income” price – a calculated price closely tied to local income that’s been an infallible predictor of bubbles. Over-priced marketsalways come back in line with the “income” price, sometimes by stagnating for while the “income” price catches up, sometimes by falling very sharply two or three years in a row.

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The reason these markets are so over-priced, of course, is that the local economies have created demand for housing much faster than builders can produce new supply. In the Bay area the high demand is due to the rapid development of technology industries, especially because they produce a lot of high-paid jobs. In the LA area – where average home prices are much lower – the lack of construction over the past decade is the main problem.

A slowdown of the national economy – which I think is very likely in the next two years – will affect the most over-priced markets the most. In the Bay area, companies will shed high-priced engineers, which will have the greatest effect on higher-priced real estate. In LA, jobs will be affected more generally but real estate will feel the effect most in the outlying residential markets like Riverside-San Bernardino.

So, what should you do in these over-priced markets? Our ability to predict the exact moment a market will go bust isn’t very good – you therefore need to think more about managing your risk now rather than timing your moves later. If you’ve been thinking about selling property, think sooner rather than later. If you’ve made a long-term investment and can ride out a dip in prices, don’t worry too much. If you’re flipping properties, shorten your time-horizon. If you’re investing in rental property, stay away from the upper end.

For an actual bubble-and-bust I’m most worried about San Francisco itself, already heavily over-priced and with prices up 14 percent in the past year, San Jose, where job growth remains very high, and Riverside-San Bernardino, which is always the tail of the LA dog.

The eleven markets in the bottom half of our table aren’t immune from a fall in demand but the risks are lower, so investors have a wider range of options.

With the exception of Santa Maria, all have job growth that is at or above the national average rate. And home prices in the past year were up between 5 and 11 percent. These are signs of good growth in demand for housing, as long as home prices don’t stray much above 20 percent.

In these markets a slowdown won’t hurt home prices very much, so you can make just about any kind of investment – rehab for resale, single-family rentals, splitting single-family homes into multi-unit rentals, flipping properties, apartments.

In Stockton, Modesto and Salinas, where demand is partly tied to the Bay area – which is why prices have been rising sharply – investors should stick to rentals in the “target rent range”, which extends from the average monthly rent to about 25 percent higher. This is where you find the largest concentration of renters – an important consideration when demand slows.

And in the those markets where job growth has been slowing the most – Salinas, Modesto, Sacramento, Santa Maria – rental investors should restrict themselves to recession-resistant locations near colleges, medical centers, retail centers, government offices.

California remains the land of opportunity, but also the land of boom and bust. This year investors can still find opportunity there but need to carefully check the risks.

Source: Ingo Winzer

5 great real estate markets for investors in 2019

Diversification is a solid strategy to reduce risk in your portfolio. Risk is an inherent element of any investment, of course, and there are few better examples than real estate, but a little selectivity can go a long way. If you invest in this year’s most promising sectors, you’ll minimize your losses and maximize profit.

Nothing is guaranteed, but research has shown that the five real estate markets in this article have enormous potential.Investors should take note of the opportunities detailed below and assess how senior housing, student housing and other sectors might factor into their plans for 2019.

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1. Senior housing

PwC’s Emerging Trends in Real Estate 2019 Report claims that the senior housing sector will prove profitable for both investors and developers in the new year. The market is likely to grow as shifting demographics drive demand for nursing homes, independent living units, assisted living facilities and long-term care facilities.

Recent data and statistics support PwC’s report, as the number of Americans 65 and older will reach 79.2 million by 2035. As the Baby Boomer generation ages, investors should take the opportunity to research senior housing developments, investing in newer properties with modern amenities if they can find them.

It’s necessary to include the caveat “if they can find them” because the inventory of senior real estate properties is comparatively old beside other sectors. A disconcerting 58 percent of the stock is more than 17 years old, and 32 percent is more than 25 years old. Still, developers can make senior housing—and even nursing homes—a priority.

2. Growing cities

Growing cities such as Cleveland, Silver Spring and Fort Lauderdale all show promise in 2019, reporting rapid growth and high demand. For instance, home prices have been rising since last year. Since home prices are generally an indicator of demand for houses and rental properties, signs are good.

Investors working within the limitations of a strict budget will also find these markets easier to access. They’re not over-priced, and the greater availability of properties in attractive locations makes these areas an appealing investment opportunity. Still, strategies will differ from market to market, and caution is necessary.

Any investors interested in finding a property in a growing city should look for areas where the rent doesn’t go more than 25 percent above the average. Staying within the Target Rent Range is advisable, as it’s where investors usually find the highest concentration of renters, which is crucial during a recession.

3. Student housing

Real estate investors have a complicated relationship with student housing, and their hesitance to enter the sector is rational. The attitude and lifestyle of college-aged tenants often result in property damage and conflict. That said, investors who work past these problems tend to enjoy a broad spectrum of benefits.

The rising cost of room and board has made off-campus housing attractive to students—it’s now an average of $2,238 less per year,than on-campus living. Investors who purchase multifamily properties see high demand, along with stability through recessions and consistency through periods of market volatility.

Investors with properties in the student housing sector can also expect to see consistency across the board since lease renewals are often easier to obtain. Students usually know in advance if they plan to return to school the next year, which allows for a degree of predictability that’s absent in other sectors.

4. Suburban areas

Urban revitalization in smaller U.S. cities has attracted attention to the suburbs. Millennials are the driving force behind this transition, and investors should take note.

The millennial generation makes up over one-in-three American workers. Therefore, the priorities of this valuable demographic become essential to understand. As they begin to show greater interest in single-family homes, the suburbs show substantial potential

Investors might have a certain image in their head of a young, single bachelor when they think of millennials, but this picture is far—and getting farther—from the truth. Many millennials are choosing to settle down and start families, and as the demographic ages and evolves, the housing market will reflect their preferences.

5. Commercial properties

Investors who are familiar with residential real estate may hesitate to consider commercial properties,but evidence supports its profitability in 2019. An improvement in industrialization and trade opportunities, the introduction of Real Estate Investment Trusts and the popularity of co-working spaces are all affecting demand.

Co-working spaces, in particular, have taken center stage, and the industry’s rapid growth makes commercial properties with flexible design a top choice for investors. With the flexible space/co-working sector expanding, the future for commercial real estate is bright.

If it doesn’t exceed their budgetary limitations, investors should seek and purchase modern commercial properties that incorporate flexible design elements into their space. These features include movable desks, adjustable walls and other furnishings that allow for simplified rearrangement and new configurations of a work area.

Mitigate risk and ensure profitability

Investors who research and review the five markets detailed above can mitigate risk and ensure the profitability of their portfolios. Although their success depends on variables outside of their control—and beyond the speculation of experts—certain sectors in real estate show promise in 2019.

Senior and student housing, growing cities, suburban areas and commercial properties deserve attention moving forward. Investors should look into these opportunities today.

Source: born2invest.com

Top-3 Japanese real-estate firm Pressance makes its presence known in Thailand

JAPAN-BASED Pressance Corporation Co Ltd, a top-three developer of condominium projects in Osaka and other Japanese cities, has expanded its business to Thailand, where it holds a 25-per cent stake in a joint venture firm with Shinwa Real Estate (Thailand) Co Ltd and Prebuilt Plc.

They will this year develop their first condominium project in Thailand, Ren Sukhumvit 39, worth Bt2.5 billion.

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“Thailand was the second country in Asean where we have invested in a condominium project after our expansion to Vietnam last year,” Pressance Corporation Co Ltd’s manager of business development, Tatsuya Nakae, said in a recent interview with The Nation.

He sees great potential in developing condo projects in Thailand, due to the country’s heavy investment in infrastructure. The rapid expansion of mass-transit rail projects in the country’s major cities, is a particular inducement for residential developments close to the routes.

“We entered Thailand by setting up a joint venture with our Japanese partner, Shinwa Group, which had expanded their presence to Thailand in 2017.This boosted our confidence with our investment in the country,” he said.

Since their first project, Ren Sukhumvit 39, Nakae said the company has continued its interest in further investment in Thailand with its partner, Shinwa Group. Decisions will be based on market demand.

Tomoyasu Yamabe, director of Shinwa Group and managing director of Shinwa Real Estate (Thailand) Co Ltd, says the company is following a business plan to invest Bt8 billion in Thailand in 2019 and 2020, and may ask Pressance Corporation to become a partner.

Pressance Corporation Co Ltd developed 5,200 condominium units in Japan last year and has recorded total sales above Bt30 billion yearly.

Pressance is the latest property firm from Japan to have expanded its investment into Thailand.

Source: SOMLUCK SRIMALEE

Pension fund can be used to finance housing needs- Bode Adediji

Is the housing challenge defying all logic?

No, says a former President of the Nigeria Institution of Estate Surveyors & Valuers (NIESV) and Principal Partner, Bode Adediji & Partnership, Mr. Bode Adediji. Rather, he suggests that the country should use the Pension Fund as a first tier finance for real estate development. He believes that overhauling of the Land Use Act as well as ensuring a sound mortgage system, including effective policies on housing, will go a long way in tackling the over 17 million housing deficit afflicting the country.

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What is your opinion on asset declaration provision and the Code of Conduct Bureau? Of recent, top civil servants and influential politicians have fallen foul of this particular requirement. What is your opinion on this? 

The challenge we have is what is generally with us. As a people, we are not lacking in laws, guidelines and policies, but the implementation of stipulated laws and policies is where there is a challenge. When agencies are set up to achieve a particular noble cause that will benefit the people, the compliance level is usually very low. The functions and provisions of the Code of Conduct Bureau should be sacrosanct to political office holders, civil servants and, indeed, any category of persons, who by law, are required to abide by its status in preventing or sanctioning corruption in the country. It is an area of our constitution that must not be taken for granted because it defines a lot of things about us as a people.

The continued existence of the Land Use Act is said to have cost the nation about $300 billion. Do you agree that this Act should be repealed or improved upon?

It has been a matter of controversy since it was enacted. If there is any document or law that would have propelled us from a third- world country to a developed country, it would have been this piece of law in terms of assets own culture. The Land Use Decree struggled that to bring normalcy to land ownership, it ensured that rights, entitlements and titles to land was not trampled upon. But, unfortunately, governments in different states rather than deploy it as income generating, have influenced peddling and generating undocumented income either to themselves or cronies, stripping it of its original idea and thereby making the whole essence of the Act defeated. This hampered the efficiency and delivery on its mandate. The clamour to repeal or discard it in my mind is an attempt to throw the baby away with the bath water. For us in the Nigeria Institution of Estate Surveyors & Valuers (NIESV) and at individual levels, we are canvassing for the overhauling of the Act and fundamental amendment to those areas we find not workable. The position paper on this is in the closet of the National Assembly and until we have a government that is concerned with the development of the real estate sector, justice will not be pursued and done to stimulate the private sector.

There has been a preponderance of rental defaults. What is responsible for this?

Once there is prolonged recession like we have had, it affects political, moral and institutional aspects of our national life. The economy is in recession and when there is recession people grapple with a lot of things, such as financial, social and other challenges. Fundamental areas of people’s lives are affected during recession, including the ability to house themselves, pay their children’s schools fees, feed and generally meet their immediate needs. However, many countries have fashioned out how to deal with this kind of things because some people can hide under this to shun their obligation because paying your rent is an obligation. No doubt, there are insensitive landlords who increase their rent yearly not considering the difficulties they may be putting their tenants, but on the other hand, some recalcitrant tenants refuse to pay their rentals even while buying new cars, these are realities in third world countries. But we can learn from how other countries came out of that particular situation. Some countries have come out boldly to fashion out rules and regulations to identify those who might want to hide under recession or economic hardship to avoid paying their rentals. However, in a situation where there is a national malaise of indiscipline such as ours, some tenants will want to stand up to their landlords without paying, the landlord suffers more, though some landlords also increase their rent unnecessarily without a care.

Some years back in Dubai and Abu Dhabi,  when there was tendency for tenants, where tenants move into a place and refuse to pay nor moving out of the property, the government set up a process and guidelines to resolve such impasse. The government also put in place the machinery to resolve such and to discourage tenancy disputes in conventional court, I think that is what Nigeria needs. In extreme case like that of Florida, USA, if a tenant owes his rental and the landlord fails to collect his rent as a result of the reluctance of the tenant to pay, the local government will intervene to ensure that justice is done  by investigating if the man has lost his job or debilitated by illness. Upon satisfactory investigation, the government will compel him to pay or vacate the premises.

There seems to be property glut in the market, such that is a huge number of vacant properties adorning the country’s landscape. What is responsible for this?

The proportion of the glut in the market is not directly as a result of the recession per se. Largely speaking, it has to with our collective lack of foresight. Real estate investments and projects are always seen in all countries as a medium to long term projects. But where we see that the rate of economic growth and the migration of people from certain income class to another is either not improving but retrogressing. In this scenario, building for a particular class of people, which may be referred to as endangered species and also for people you cannot foretell their abilities to take such products in the near future, for me, is the main problem  that we have had in Nigeria. So far, those who are building are building for a class of people who  are either expatriate staff coming or  people migrating  from low to medium and high-income areas to premium areas. For these set of people as soon as there is recession there will be no effective demand for such products.

To avoid this, developers and real estate investors like other businesses, should be proactive and futuristic in concept, planning, financing, development and construction. If a developer goes to a bank to borrow money to build luxury estate for a class of people that are no longer available or dwindling, then such developer is courting crises from day one. On a specific note, the way I see the country and, particularly Lagos State, is that they have failed to embark on complementary services that would encourage private sector participation in real estate development. There are things the government ought to have done to provide an enabling environment for the private sector to ensure that whatever product is rolled out by the private sector, the burden of infrastructure development should be taken away from them. Such infrastructural provision of power supply, road network, and water adds cost on the final product and by extension it becomes unaffordable to some categories of tenant that would have expressed interest on such product.

Lagos, unfortunately, has been encouraged to develop on the platform of mono axis. There was a time and largely speaking, that is, still the case where the residential outlook focused on the Lekki/Epe axis to the neglect of other areas such as Badagry and other areas that are not fully developed in the state or even encourage developments outside the state, such as in Ota, Ogun State and the Lagos-Ibadan Expressway. But because this was not done it caused a lot of environmental and physical anomalies that is so evident in the real estate development in the state. People trooped to build in the axis, but the income and unemployment level continued to dwindle in building for the class of people that are not available to take up such properties.

Where is the vacancy challenge more pronounced – in commercial office space or residential accommodation?

Location by location, I would say. If you look at Ikoyi, for instance, predominantly, most of the first class office spaces are empty. But where you have small scale office spaces, the percentage of void is less. Victoria Island and part of Lekki is passing through a transition where largely speaking even residential areas are transformed and converted to office use. Whenever you have recession the first target that is hit is commercial office space because recession always brings about sporadic business closures and when you close down you close down. The highest rate of failure for upstart companies normally happens during recession and so if you have built for people who have just taken off, the response from the market feedback is that there is no effective demand for such a space.

What would you recommend to a real estate developer in Lagos?

My position is that a-would- be developer should select his location carefully and professionally. The mere fact that you want to join the bandwagon of Lekki/Epe axis developer does not mean that you should neglect other areas where you have ready or emerging markets. Generally speaking, people cut their coat according to their cloth. The tendency to build all these five and six bedroom flats, terrace houses should be curtailed. Families now prefer two or in maximum cases three bedroom flats and in some cases, mini-flats, where common services can be shared. The other one that is important is that the idea of encouraging individualistic self-development approach in real estate is a problem on its own. Nigerians have forgotten to implement what we learnt in school known as the economy of scale.

In many countries, the role of building where a man is going to live has been shifted from his neck to that of developer but in Lagos today and many parts of the country, the individualistic housing development is still the main focus of every one. In a situation where you have developers in different categories of small, medium and large scale then the burdens and cost associated with individuals building their own houses should be transferred on their necks and the prices will go down, the ability to pay the rent becomes enhanced. But as long as we allow individuals to acquire their land and struggle to build it on his own even when he is able to build one or two units and let one out, the proportionate cost becomes so high that prospective tenants cannot afford it. Where you have large scale housing, construction cost per housing goes down and expected rental income from such rental property becomes modified.

People, for some reasons and belief, want to have this satisfaction that they built their house themselves. What is your take on this?

I agree with that because it is a cultural problem, but for how long should we run our lives based on cultural inclinations when you know it is a problem? Shouldn’t we borrow the good things from overseas just as we borrowed their education? Why can’t we borrow their culture that subscribes to communal project development and living? I think that is the way Nigeria should go. In fairness there are so many companies currently that are specialised in small, medium and large scale housing estate development and they have been successful. What the government should have done is to focus her attention and place more emphasis in terms of how they allocate land, roll out infrastructure etc. But what we have is that some private and government lay-outs and individuals are encouraged to do their designs, seek their contractors or construct themselves, costs begin to rise and rental expectation will not be met just like we are witnessing.

Wouldn’t it be as a result of not having a functional mortgage sector?

There are so many problems associated with it and mortgage system is part of it, including the Land Use Allocation Policy. It should  be done in such a way that a particular registered developer would be assigned terms and conditions to roll out specific projects within a specified time and to be able to sell to those who have access to mortgage. This will ensure that the nation’s housing problem is being looked at in a very holistic manner and the result is we will be successful at the end of the day.

 

Why is there a preponderance of quacks in the real estate sector? Some stakeholders attribute this to the fact that would be clients prefer cheaper agency fees compared to the registered agents who insist on 10 percent commission for their services?

I don’t think that observation is correct. There are several reasons why clients patronise more quacks than registered surveyors. Firstly, the percentage of registered surveyors vis-a-vis potential customers is disproportionately low compared to the prevalence of quacks. If for example a prospective client’s first access is to a quack, then that is where he will go. I cannot think of any registered surveyor’s firm that is still very rigid on the percentage of professional fees that should be paid. You can do that during the boom but not now, nobody that is realistic can insist on that during recession as we have it now. Really, quackery will continue to grow in this country for so many reasons including lack of good job opportunities. The increase in the retirement patterns of able-bodied men and women in many respects particularly in urban centers has fuelled the practice. You cannot find an able bodied young man sitting down and idling away when he knows that he can print complimentary cards to persuade, encourage or deceive somebody to give him an assignment to go and look for a house; for these set of people their first port of call is foraying into petty trading or quackery in consultancy. These set of people by their modus operandi have greater mobility and accessibility. For as long as you have this kind of recession in Nigeria, it will spring up a large quantity of quacks because again, they have more fighting spirit than the registered estate surveyors, they are aware that their sustenance and livelihood depends on  how hard they work.

Are you satisfied with engagement of the private sector with the government in terms of housing provision?

In terms of patronage and engagement, there has not been any government in the last 30 years that is pro-professionals and my challenge is that until professionals find themselves in the corridors of power  and within the government apparatus, we should not expect a change in the way that the government relate with us. I suspect that if there is no change, the neglect that we suffer from government will continue to rise. But, for example, if an estate Surveyor and Valuer becomes a Senator of the Federal Republic of Nigeria tomorrow, his perception of the housing crises will be different. Again, if a registered Town Planner, an Engineer, or an Architect becomes a President or  Chief of Staff in the Presidency, the kind of  reception he will give to professional opinions in critical matters of housing and urban development will be different.  Until we have that setting and avoid walking far away from the corridor of power, it means that we can only talk while other makes the difference.

There are so many abandoned Federal Government buildings especially after the movement of the Federal capital to Abuja? Why have they not been  put into profitable use rather than allowing the buildings to rot?

There are some of them that are still going through legal dispute or crises while some seen physically as belonging to government has actually been sold. An example is the Federal Government houses at Bishop Oluwole in Victoria Island sold over 10 years ago. I will not blame anybody who bought and refused to do anything about it. But the abandonment is a sad development especially for a country that says it wants change and is pro-development. I have not seen any fundamental change in government policies concerning abandoned projects and properties all over the country in concrete terms. I have never seen any government in the last three or four regimes that has actually factored in their calculus this vibrant sector of the economy that can be used to check youth unemployment. If a government is pro building and pro development, people who leave school and trained as architects, engineers, technicians can actually have a place to go and work. Not only that, majority of Nigerians in Diaspora who have capacity to buy houses, if there is a functional mortgage system can expand that. But the truth of the matter is that it has never been part and parcel of any government policy to see housing intervention beyond the clamour to say we are putting roof on peoples head to embrace a more serious and wider goal of empowering people by providing employment for the young people. Once we have that, the Land Use Act perspective will change including the treatment of the Pension Fund that has accumulated to over N8 trillion. Things like entrepreneurship support system will change. The last one that I know that we talk about always instead of addressing the challenge is looking into the architecture of our housing problems and solutions to the extent that we have spoken about our concentrating on what we have to build rather than the dependency on foreign products which has been on for the past 50 years.

Is it possible to have a ‘Made-in-Nigeria house’?

Until we take a look at the local building materials we have and enforce it on people to build houses, housing cost will continue to rise and decent housing may continue to elude a greater percentage of the people.  We can ensure that 80 per cent of the material to be used to build anything in Nigeria is made in Nigeria if we have the political will. New technologies will be encouraged, no doubt, to ensure that our timber in the forest accounts for 70 per cent of our building materials either in terms of our walls, windows or floor . If other countries have done this successfully, we must not attempt to reinvent the wheel.

What best use can the Pension Fund be put into judging from the fact that it runs into trillions of Naira now?

Pension fund can be used to take care of short-term housing needs.  As at a year ago, the Pension Fund managers were prohibited from engaging in long term investment. But I believe that there can be improvement on that law by categorising for instance, some real estate development that can take about 24 months as not too long a time to fit into the laws that set up the fund. Where there can be a certainty I believe and advise that the idle fund in the Pension purse should be deployed into housing provision with short gestation period. It’s not for real estate financing that can take 10 or 15 years it can even be used as first tier finance for a particular project. It is when a nation cannot take a creative look into what their challenges and concerns are that makes the problem to persist. Look at the issue of dearth of hostel accommodation for students in the universities, why can’t the government encourage developers and assist them by making it possible for them to draw from the fund to build hostels; no doubt, the students will pay and a great need would have been met.

Why are people holding on to the concept of family houses, abandoning houses for years and living them as relics instead of earning rental income from them?

They are littered all over the place and that is an area I have never seen a government agency looking into. Those in the villages, historically and culturally, are understandable. For instance when Mr. X was making waves he lived in Abuja and went home to build a house but unfortunately the same Mr. X never encouraged his children to holiday in the village. Unfortunately when he passes on, it becomes automatically an abandoned country home occupied by cockroaches, lizards and snakes because the focus of his children are different. In this country, we lay more emphasis on entitlement policy as far as heritage is concerned than transforming a particular asset into functionality and utility. That is why you find out that most personal houses and buildings abandoned are underpinned by family squabbles. Those without family squabbles don’t have capacity to transform them into money yielding asset. It is a whole gamut of challenges that make the concept of family houses embarrassing and prevalent. It is important for government to find a way of encouraging some NGOs to go into advisory services that people can tap into where for example a family of three or four is having a squabble over a property they can be advised as to the channels they can explore raise fund and the kind of property they can redevelop the building into to yield income and everybody will be happy. In a case that the children are all abroad they and have no confidence on their relative they can be advised to appoint an independent estate management advisory agent to manage the property. The only way we can achieve the objective is for government to see the loss encountered by these families as not only theirs but that of the nation in general.

Why is the Federal Secretariat in Ikoyi still abandoned?

I don’t have information on why the Federal Secretariat in Ikoyi is still the way it is now that we have the same political party in Lagos and Abuja. Whatever may have been the crises before now on the management of the property ought  to have been resolved because at the end of the day, it is not only the developer, the state and Federal Government, but the entire  that is losing through the abandonment of such strategic and massive asset.

Nigeria needs aggressive infrastructure push to unlock N4.7trn real estate sector

When Ebong Bassey committed N650,000, saved from his meagre income as a civil servant, to buying a plot of land from an estate located along the Lagos-Badagry Expressway in Lagos, he did so in anticipation that the on-going expansion and reconstruction of the expressway would be completed in good time and roads infrastructure problems would have been solved.

Bassey went ahead to start developing the land with the building of a three-bedroom bungalow, keeping pace with the reconstruction of the expressway and hoping to live in his own house soonest. The Lagos State government which was building the expressway, from a snail pace of work, has stopped altogether and the contractor has gone on holiday.

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That is how Bassey’s dream of owning a home has been dashed because the expressway has become a nightmare with an impenetrable gridlock. He is not encouraged to continue his development and he cannot get back his hard-earned money. He is in a real dilemma. And he is not alone in this.

Nigeria has a huge real estate sector whose value is estimated at N4.7 trillion. But the country cannot unlock this value due to infrastructure constraints. The country’s yearly demand for housing is estimated at 1 million units. Only 100,000 are supplied. The rest, which offer huge investment opportunity, cannot be supplied for reasons of infrastructure.

Northcourt Real Estate in its recent report confirms that the absence of infrastructure, which constitutes 15 percent-20 percent of Nigeria’s real estate sector, has contributed to the high cost of development. Ayo Ibaru, the company’s director, real estate advisory, says “bridging this chasm is crucial to unlocking sustainable growth the economy so desperately needs”.
Land and housing and, indeed, other forms of real estate are like chicken and egg. To reduce the cost of development, investors always look for areas where there are infrastructural facilities such as roads, electricity and water. This explains why land prices are generally high in city centres.

In spite of the lull in the market, the Northcourt report reveals that land prices increased in Lagos, with Victoria Island and Ikoyi growing by 11.3 percent and 14 percent year-on-year, respectively, while with the growing population and activities around the Lagos Island area, prices of land in places like Agungi in Lekki grew by 18.9 percent.

On the flipside, Chudi Ubosi, principal partner at Ubosi Eleh + Co, notes that due to absence of infrastructure, land value at the outskirts of the city tends to be static or appreciates slowly, making investment in such areas unattractive with little return on investment.

Poor infrastructure base is also affecting other segments of real estate.

“High land costs, weak infrastructure and the absence of modern facilities continue to hamper the growth of Nigeria’s industrial sector. These justify the current rentals, which range between $3 and $4 per square metre per month with an average yield of 7.5 percent,” Ibaru confirms.

Retail is another segment of real estate whose development is also constrained by infrastructure. Government’s investment in infrastructure is not matching the need which is estimated at $3 trillion.

The 2019 proposed budget has set aside N2.28 trillion for capital expenditure, which is lower than the N2.87 trillion earmarked in the 2018 budget, meaning that the gap will continue to widen.

Nigeria’s consumer class has grown by nearly 140 percent over the last decade. The country has 10 cities among the top 50 urban consumer markets in Africa and 52 million consumers who can afford products within the above average to premium range. Nine million of these consumers are in Lagos.

But the needs of these consumers cannot be met because investors cannot develop outside the city centre due to lack of infrastructure.

“We are constrained by land availability in the big cities, especially in Lagos. Lagos can accommodate 20 malls but the problem is in finding the land. We cannot get the right land size at the right price to build the kind of mall we have in Owerri and even where you find one, the price will be too high,” said Eddie McDonald, COO, Resilient Africa, developers of Owerri Mall.

MKO Balogun, CEO, Global PFI, agrees, adding that besides macro-economic issues, the new investment decisions which favour community neighbourhood malls are based on land in the right place at the right price. This right place, he explained, means where there is infrastructure.

Source: Chuka Uroko

The Most Competitive Housing Markets In The U.S. Going Into 2019

A new study of 1.5 million homebuyers—and their competitive behavior when it comes to buying a house—comes with some slightly surprising results: California is not at the top of the list. Instead it is Denver, Colorado, where you have to flex your home-buying muscle the most, according to data from a study by Lending Tree. They looked at the 1.5 million mortgage requests for purchase loans that came through their system in 2018 and ranked the cities based on three main criteria:

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  • Share of buyers shopping for a mortgage before choosing a house
  • Average down payment percentage
  • Percentage of buyers who have a credit score above 680

Granted, Lending Tree is not a lender, but an online broker that matches applicants with various lending institutions, but 1.5 million people is still a significant enough size to learn some interesting takeaways—such as the other surprising result that average down payment sizes are all less than 20%.

Here is the list of the top ten cities, with the average amount of the downpayment in parentheses.

    1. Denver (16%)
    2. Los Angeles (17%)
    3. Portland, Oregon (15%)
    4. San Francisco (17%)
    5. San Jose, California (19%)
    6. St. Louis (15%)
    7. Las Vegas (14%)
    8. Seattle (19%)
    9. Sacramento, California (15%)
    10. Boston (16%)

Of course California still dominates the list, which isn’t too surprising since four cities in the state are also at the top of the list of how much you need to earn to live in each U.S. city. Yet, it is interesting to see Denver climb to the top ahead of all the tech hubs. The median sales price for Denver ranged from $502,000 to over $540,000 during 2018, according to the Denver Metro Association of Realtors. Las Vegas is also somewhat of a surprise since home prices there have finally crossed back over the $300,000 threshold after plummeting to nearly half that during the housing crash after 2008.

Also, in a sign banks have moved even further away from the traditional 20% model, none of the 50 metro areas on the list had an average downpayment size of 20% (or higher). Only San Francisco and Seattle had down payments as high as 19% and the average for the top ten cities, at 16%, is only two points higher than the average for the remaining 40 metro areas. It is no longer just about how much you bring to the table, but your buying behavior that will get you ahead of other buyers.

The least competitive markets are Pittsburgh at No. 47, Virginia Beach at No. 48 and Birmingham, Alabama at No. 50. They have downpayment sizes of 13% for Pittsburgh and 12% for Virginia Beach and Birmingham.

Source: Amy Dobson

Investment in Asia Pacific Commercial Real Estate to Rise in 2019

Global commercial real estate consultant JLL is reporting this week that Asia Pacific’s overall real estate transaction volumes in 2019 are expected to rise by five per cent, though the pace of growth momentum will slow down.

“A decade into the economic cycle, investors are contending with macro risks and geopolitical uncertainty such as rising interest rates, continued trade tensions between the U.S. and China, as well as strains in the EU caused by Brexit negotiations,” says Mr. Stuart Crow, Head of Capital Markets, JLL Asia Pacific.

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“Against this backdrop, real estate continues to look attractive as a safe haven for investments, with its portfolio diversification benefits and relatively higher returns compared to other asset classes. However, in this late-cycle environment, investors are becoming more selective and disciplined in exiting investments because it’s getting harder to find income-producing alternatives.”

In Asia Pacific, real estate demand will continue to be driven by its strong demographic fundamentals. The region’s urban population is expected to exceed 400 million people by 2027, while the population aged 65 and above will rise by 146 million people within the next 10 years. By 2021, Asia Pacific’s e-commerce market is projected to grow to US$1.6 trillion.

Dr. Megan Walters, Head of Asia Pacific Research of JLL says, “Despite the macro concerns, we believe that this region’s opportunities will mitigate the risks, spurring investors and occupiers to look into sectors that have defensive qualities or those that run on less cyclical demand drivers.”

According to JLL, there are the five key trends that will shape the industry in Asia Pacific in 2019.

Growth in ‘living’ assets

The region’s increasing urban population has seen a growing demand for alternative residential arrangements, including student accommodation, co-living, multi-family, nursing homes and aged care.

For investors, these living sectors offer attractive yields and long-term growth prospects as well as an opportunity for portfolio diversification. “These new sectors are set to outperform traditional residential assets given their efficient use of space, superior building management, and generally higher entry yields,” explains Mr. Crow. “Aged care, for instance, offers returns of 11 to 14 per cent in Tokyo, and 8 to 12 per cent in Singapore.”

Building flexible spaces to attract talent

Businesses are increasingly using shared workspaces as a way to foster innovation among employees and win the war for talent. This renewed focus on building human experiences has led to an uptick in flexible offices – including co-working and serviced offices – across the region.

Dr Walters says, “By 2030, flexible work spaces could comprise 30 per cent of some corporate commercial property portfolios worldwide. This means that market consolidation will become more common – landlords and developers will start to create their own flexible space offerings, form joint ventures with co-working providers, or look at mergers and acquisitions among co-working brands.”

Rise of logistics and data centres

With Asia Pacific leading global e-commerce adoption, there is rising pressure for organizations to establish their data storage infrastructure as well as warehousing facilities for physical retail goods.

Mr. Crow says, “The robust rate of consumption is driving increasing investor interest into data centres and logistics in Asia Pacific. These sectors will continue to expand, with significant capital targeting emerging markets like China, India and Indonesia. Meanwhile, logistics hubs in major cities are growing. As an example, the logistics market in Sydney increased seven-fold between 2015 and 2017.”

Shift towards debt exposure

With banks tightening their lending criteria, this leaves a gap for non-bank and offshore lenders to enter the market, particularly in Australia, India and China, according to Mr. Crow. As a result, there is a spike in investors turning to global offshore lenders who provide flexible forms of either debt or equity on selected projects.

Likewise, institutional investors are also expanding their footprint into real estate debt. Mr. Crow adds, “Debt investment is one way to curb risk in a portfolio and investors are increasingly looking at ways to use debt to shield them from market volatility and falling property incomes.”

Evolution of smart cities

With smart city initiatives pushing ahead in Singapore, Japan, South Korea and Australia, Asia Pacific has seen an increasing need to build better digital infrastructures to maximize efficiency, sustainability and improve the living conditions for inhabitants.

Dr Walters explains: “Proptech – the convergence of real estate and technology – plays a key role in the future development of cities. As smart cities are highly data-driven, smart property development and management enable extensive data collection and analytics – both of which are crucial for cities to create more livable environments for their growing populations.”

Source:  Michael Gerrity

11 Ways Real Estate Investors Can Build Their Network

Building a network is one of the most important things you can do as a real estate investor. The size and strength of your network will directly determine how many deals you can do, how fast you can make money, how much those deals will cost you to do and what your profits are. Your network can be your target pool you market to. When times are lean, a strong network means you can do a lot more organic business, without having a big marketing budget too. If you want access to deals, funding and buyers, you’ve got to establish and scale your network. Here are just some of the ways to get started or expand on what you have already.

1. Travel

At some point you’ll want to go on vacation or research new real estate markets in person. These are the perfect opportunities to expand your network to include new contacts you wouldn’t otherwise have the chance to make. In fact, a little networking while traveling can more than pay for your trip. Business communications like these can also make your trip costs tax deductible. (Just make sure you consult your own accountant about how to get those tax breaks.) This can be to a new town close by, at the other end of your state, out of state or even out of the country.

Note that this is much more effective when not just left to chance meetings, even though you may be surprised at how many accidental connections you can make along the way. Look up local real estate investors, financiers, attorneys, title agents, real estate agents and other industry players before you go. Set up coffee meetings, or drop in at their office and introduce yourself.

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2. Professional Networking And Events

No matter where you are, there are bound to be numerous organized networking opportunities every month. These can include industry happy hours and luncheons, trade shows and office open houses. The organizers have already done all of the hard work to promote and get people there specifically for you to meet. Take advantage of that and show up.

3. Meetups

Some meetup events can be done online through webinars, though the focus is really on meeting up in person. You can search and find meetups for just about everything you can imagine. Don’t just limit yourself to real estate investing events either. Think about the types of activities and interests your target contacts like to engage in. They may be car fanatics, yoga practitioners, tech geeks or something else. Get into those groups, or set up your own groups and spread the word.

If you are looking to build your network in the industry and want to connect with other real estate investors and supporting vendors and successful entrepreneurs in this space, then get out to real estate seminars and live conference events. You can meet hundreds of new contacts in the same place in just a few hours. It’s a great way to super-size your network in a very short space of time.

5. Social Media

Online social networks can make connecting fast and easy. Just know the difference between making real, viable contacts and just adding followers to your profile.

6. Host Classes

Once you’ve gained some experience and knowledge, why not host your own educational real estate and finance events? Teach people about investing, buying their first home and remodeling properties — or wherever your expertise lies.

7. Open Up Your Home

Building your network doesn’t have to only mean suit-and-tie professional events at someone else’s location. You can open up your home to neighbors, friends and other contacts too. Grow and build relationships in your comfort zone. Have a holiday party, watch a sports event together, host a backyard BBQ or something else that would appeal to your crowd.

8. Open Houses

If you aren’t a big fan of filling your own home with semi-strangers, then use your real estate inventory. Do it at one of your open houses.

9. Host Charity Events

Now, you shouldn’t be using charity as a marketing ploy. Yet, if you want to meet people who care about the same things as you do, then hosting a charity, volunteer outing or fundraising event can be a great way to do that, and make a difference at the same time.

10. Be More Social

Never leave home without a stack of business cards. Try being friendlier and more conversational wherever you go. You might be surprised at the contacts you can make just doing your regular errands around town and taking your family out. If you aren’t very outgoing, wear something that grabs attention and get people to start the conversation with you.

11. Sponsor Others

If you don’t like public speaking or aren’t confident in your own event organizing yet, then try sponsoring other people’s events. Make sure you get a copy of the lead list.

Now, pick a few types of networking events which suit you the most. Chances are you’ll find something right up your alley, and your business will thank you.

Source: forbes.com

Housing deficit : Expert seeks flexible rent system

A real estate manager, Mr Tunde Balogun, says complexities and absence of a flexible rent payment system makes affordable housing to become an illusion for many low and middle income earners in Nigeria.

Balogun, the Chief Executive Officer, Rentsmallsmall Ltd., Lagos, made this known at a media briefing on Monday in Lagos, saying that the issue had made vacancy rate in the residential and commercial markets to jump up.

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He said that most buildings being touted as affordable were beyond the reach of an average Nigerian based on the present payment structure.

Balogun recalled that the Federal Housing Authority Mortgage Bank had recently disclosed that the Lagos property market was in a crisis.

This, according to the bank, was due to the default rate on rented properties, which had risen to 71 per cent and vacancy rate hits 74 per cent in prime property locations.

Balogun said that to address the property market crisis,  his outfit “offers a flexible rent initiative for low and average income earners to make it possible for them to seamlessly find a new home within their budgets.

“Our model is a departure from the annual or two years rent payments being demanded by landlords, as it allows for monthly, quarterly and biannual rent payment.”

According to him, the platform ensures that property owners get screened and verified tenants, which guarantees that the tenants are eligible enough to pay future rents diligently.

He noted that the rising vacancy and rent default rates were reflection of the economic downturn, impacting on the citizen’s ability to meet their rental obligations.

Balogun said that the initiative would alleviate the concerns of many Nigerians as regards payment of rents and boost the growth of housing industry.

Home buyers could lose big by not working with agent serving them solely -Consumer Federation

A home buyer could lose big money by not working directly with an agent who solely represents them, the Consumer Federation of America warned today.

A couple looking to buy a $200,000 home who contacts an agent representing a seller could overpay to the tune of $10,000 to $20,000 because the agent will ask them how much they can afford to pay to maximize the price, said CFA Senior Fellow Stephen Brobeck.

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As another example, a buyer looking at a home during the summer could be told by an agent solely representing them the house needs to be weatherized to make it comfortable during the summer and keep heating bills down while an agent representing the seller might not give that warning, Brobeck added.

The answers were in response to a report the Consumer Federation released highlighting the problems consumers have in working with reality agents.

While most people believe real estate agents are legally required to represent the interests of the home buyer or seller they are working for, many aren’t, the study warned. The report explained a fiduciary agent for a buyer seeks to help the buyer purchase a desirable house for the lowest sale price.

On the other side of the coin, fiduciary agent for a seller is obligated to help the seller find a buyer who will reliably and timely purchase a house for the highest sale price.

However, often many agents represent both seller and buyer in the same transaction to maximize the commission in the deal.

This can create serious conflicts of interest, including breeches of confidentiality the Consumer Federation cautioned.

However, home buyers and sellers have significant power in getting agents to treat them fairly since there is considerable competition among agents, the report said.

The Consumer Federation recommended a buyer or seller ask an agent before they sign an agreement if the real estate professional will be solely representing their interest throughout the entire home purchase process.

“They should also ask the agent for a completed form that discloses this relationship,” the consumer group said.

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