WITH world’s ultra high net worth population growing, and real estate playing unique role of an investment opportunity, a new report forecasts that the ongoing shift in the wealth creation cycle from the West, and the growing significance of inter-generational wealth transfers will have significant consequences on the luxury residential real estate market, especially on new developments and a change in investment grade cities such as Lagos.
The Wealth-X and Sotheby’s International Realty Global Luxury Residential Real Estate Report reveals that the future of luxury residential real estate looks highly promising and positive, with its tendency to gain in value faster than traditional real estate and its greater appeal to ultra high net worth (UHNW) individuals with inherited wealth as well as its reputation as a safe asset.
Essentially, luxury residential real estate is set to see more and more growth in demand, for example, with the anticipated fast growth in UHNW wealth and overall economic development in regions like Africa. Lagos is one of the hubs expected in Africa to gain from the new developments. This will be accentuated by the globalization of business interests around the world, with an increase in the number of UHNW individuals who will purchase residential real estate in these new markets.
The 2015 report identifies the most significant markets for UHNW residential property investment, provides a profile of the global luxury residential property consumers and offers insights into their spending habits relating to their luxury residential property investments. Luxury residential real estate holds a special place within the portfolio of the world’s ultra wealthy. According to the report, the world’s ultra high net worth population is growing, and real estate plays the unique role of an investment opportunity and a need. Those that work hard want a haven they can retreat to so they can savor their free time. They also lead global lives and have varied interests that take them to far-reaching places. Many will purchase property in locations they fall in love with during their travels, or to meet the demands of their lifestyles. Key findings revealed that the world’s ultra high net worth population totals 211,275, and these individuals each own, on average, 2.7 property while $2.9 trillion of the world’s UHNW wealth is held in owner-occupied residential real estate assets. About 79 per cent of the world’s UHNW individuals own two or more properties and just over half of them own three or more residences.
The index, noted that numerous UHNW individuals have utilized real estate as an investment vehicle to increase their wealth, but these properties continue to have a primary purpose: first and foremost, they serve as residences. Despite this phenomenon, one pervasive trend remains true – UHNW individuals’ interest in luxury residential real estate is not bound to any one location. Many in the UHNW population acquire properties in areas that have sentimental value and that can offer privacy. This is why, aside from their primary residences typically located in global hubs, UHNW individuals’ secondary residences in the countryside are often particularly luxurious. The real estate industry is responsible for over 7per cent of the world’s UHNW fortunes, up from around 5per cent in the previous year
UHNW individuals’ personal and professional considerations, in that order, tend to drive the demand for residential real estate. Residential real estate, while it is known as a long-term safe investment, is almost always purchased because of a specific connection between a UHNW individual and a particular place. New markets are becoming increasingly important in generating investment from new UHNW individuals and therefore new demand for luxury residential real estate – whether for these new UHNW individuals, or for foreign-based UHNW individuals who want to enter these markets. In Nigeria, Ikoyi in Lagos continue to see soaring housing prices with high demand – spurred by the governments’ focus on tourism and real estate as sources of investment.
Unlike other products, luxury residential real estate values follow luxury goods and not the general housing market, and are therefore poised to increase in cities like Lagos. This is particularly true as HNWIs turn their luxury investments toward non- consumables and experiential luxury products that have lasting value. Luxury is becoming more personal and internal than social symbol or net worth.
Buyers are inclined to engage emotionally with developers they are comfortable with in terms of they represent and present to the market place. The right micro-location is imperative for HNWIs purchasing a luxury home. In addition, a luxury home must be finished to exceptionally high standards. HNWIs are looking for “architectural excellence in prime locations with the latest finishes,” noted Catherine Deluce of Christie’s International Real Estate.
As the Nigerian economy remains unstable, buyers are finding little return on investment in the stock market and are instead recognizing the intrinsic value in purchasing and enjoying a home, especially luxury properties. This is because high quality properties as safe asset when compared to other asset classes prone to devaluation, depreciation, diminution and expiration.
Nigeria especially Lagos cannot be immune to this wave of attraction to luxury properties and only few renowned developers are playing in the real estate luxury market. They include Cadwell, UPDC, Megamound, and South Energyx Nigeria Limited (Eko Atlantic). These firms’ dominant role or track record in the ultra luxury market, have set them apart amongst private developers. The firms are winning the hearts of buyers through their classical designs as Lagos maintained its ranking in the top echelons of global cities of influence.
An estate surveyor and valuer and senior partner, Nelson Thorpe Alonge, Mr. Kunle Alonge said the luxury real estate market in Nigeria will remain attracted to prospective buyers in 2016, as the the budget increased capital expenditure, which means there will be more activity towards government’s investment in productive activity and infrastructure.
“There would be generally a marginal improvement in economic performance and more expectations this year. There will be continuation of luxury real estate developments, but developers would need to segment, study demand profile and identify the market before embarking on developments, ” he said.