The document discusses the luxury homes market in Lagos, Nigeria. It finds that while most luxury home buyers in Lagos are high-earning Nigerians looking for detached houses and apartments, the economic downturn has lowered consumer confidence and demand for luxury homes. Developers have lowered prices but buyers are generally only willing to pay up to N100M, which may not be enough for the amenities they desire. Flexible payment plans are needed to boost the market as outright payment is most common currently.

1. Market Research Brief: Real Estate
THE LUXURY HOMES MARKET IN LAGOS
A number of luxury residential properties have sprung in Nigeria’s major cities with beautiful landscapes and an evolving culture of modern architecture in
building design. Lagos, Abuja and Port Harcourt have the highest concentration of luxury residential properties in the real estate market. Lagos being the
business nerve of the country boasts of a ticker density compared to Abuja, the country’s center of politics and government administration. Top luxury locations
and their average prices include Banana Island-N450M, Niccon Town-N320M, Ikeja GRA- N250M, Lekki Phase 1-N140M in Lagos, Maitama-N430M, Asokoro-
N418M, Jabi-N400M in Abuja, GRA Phase 2-N145M in Port Harcourt. There has been increased investment in high rise apartments in Eko Atlantic, Atlantic
Resort, Lorenzo, Ikoyi, and No.4 Bourdillon in Lagos. Most of these high end luxury homes are graced with tower structures and have average price points of
$1.5m per apartment. These tall buildings are located within business districts and are mostly intended for mixed use both residential and commercial purpose.
Consumer spending on luxury homes in Lagos have been spurred by thriving businesses and strong economic performance. Buyers of luxury properties in Abuja
and Port Harcourt are mainly political elites and expatriates. Also, the demand for luxury homes had increased due to a rising number of high net worth
individuals in Nigeria, changing investment climate and favorable demographics. A 2015 report by New World Wealth shows the number of Nigeria’s high net
worth individuals (persons with net assets valued at more than USD1MILLION) is an average of 15,400 persons and Lagos is home to 61% of this figure. Increase
in income levels means higher purchasing power for people with interest in real estate. A breakdown of Africa’s HNWIs’ financial assets shows that 23.3% of
assets were held in real estate compared to cash & cash equivalents, 22.7%, fixed income, 19.6%, equities, 19.1% and alternative investments, 15.4% according
to World Wealth Report 2015.
A typical luxury home sells for amounts from N80,000,000 to N1,300,000,000 in Lagos while in Abuja the range is from N75,000,000 to N1,400,000,000.
Condominiums sell for much lower prices between N20M and N60M. High rise or penthouse apartments sell for prices between $1M and $3M. Lagos is at the
brink of experiencing an oversupply of luxury homes with many luxury developments still under construction. Rental prices have been rising as well as the
service charges which comes with luxury amenities. A city can fail when rents rise to the point where affordability becomes an issue. Rental prices, usually
collected in US dollars, have experienced a hyperinflation following the devaluation of naira. Prices in Ikoyi had gone up from N16M to N21M in the 3rd quarter,
2015. Developers have been forced to drop rent prices by 20% due to a low demand for these houses. Hikes in USD dollar exchange rates have slowed business
activities especially for an economy which is import dependent. The country’s Central Bank has taken measures to curb inflation by issuing policies on forex
limitations; restricting 41 items from having access to foreign exchange and also limiting credit supply, therefore making dollar scarce and widening the gap
between the black market rate and the official exchange rate. Nigeria has also been affected by the global crash in oil prices, a precious commodity which
accounts for 85% of the country’s revenue. The simultaneous events of oil price crash, naira devaluation and a forex credit crunch have led to dwindling
government revenues and slow economic growth. Prices of goods have increased, salaries have remained the same, many workers have been owed and
eventually laid off. There is little demand for houses on sale let alone luxury homes. Construction projects have slowed down and investors have adopted a wait-
and-see approach; waiting for the economy to bounce back before making financial commitments.

2. 1.1 SURVEY ON LUXURY RESIDENCE: CONSUMER PREFERENCES
Pison Housing, a real estate research and housing finance firm, carried out survey to identify trends in the luxury residential market in Lagos and track consumer
demand for luxury homes in the state in light of the present economic situation. Data collected from survey reveals the buying motivations of transaction-ready
consumers and others considering purchase, profile of seasoned and first time buyers, income distribution, trends in sales as well as challenges and
opportunities faced by realtors in serving clients. It also provides insight into buyers’ preferred luxury property amenities, location, pricing and dwelling type.
1.2 METHODOLOGY
The survey was administered using online and traditional methods. A questionnaire was created using Google Forms and distributed online via emails and social
media using Facebook and LinkedIn targeted advertising. A sample of 95 respondents, 41 luxury developers and 54 high income earners, participated in the
survey. High income earners intercepted includes top management in multinational companies, investment and merchant banks, investors and business owners
in oil and gas sector, construction, retail, automobile and power. The online survey ran from February 23, 2016 - March 8, 2016 and while the distribution of
paper questionnaire was concluded on the March 22, 2016.
1.3 SUMMARY OF FINDINGS
From our research, we discovered that majority of luxury buyers have a strong preference for detached houses and apartments but may not be able to afford it
especially in Lagos where the average price of a detached duplex is N228M compared to semidetached houses and terraced houses which cost much lower.
Luxury homes are the most sensitive to economic fluctuations. The economic crisis ranging from crashed oil prices and inflation of dollar rate has generally
lowered consumer confidence from 132 in Q2, 2015 to 127 in Q3, 2015 according to a Nielsen Global confidence report. A low consumer confidence has further
worsened the demand for luxury homes leaving many in search of cheaper alternatives. Developers have purposely crashed prices of luxury homes in prime
residences to retain and attract possibly new buyers. Asides luxury homes, demand for house purchase generally has fallen, more people are thinking of renting
and avoiding lump sum payments. Potential buyers are willing to commit a maximum of N100M to buy a luxury home but will prefer a market that offers flexible
payment options like installments as opposed to the popular one time payments which developers currently allow.
Developers will need to consider flexible payment options to steer the real estate sector around and increase buyer’s appetite. Luxury home plans need to be
provided to buyers who are already conservative in their spending. Information sharing on available properties and efficient construction practices need to be
imbibed to lower building costs. Trends in construction shows that terraced and semi-detached houses make a good use of space which makes them more
affordable compared to detached houses. High quality finishing and modern design can be achieved with smart architecture and affordable building materials
including wood beams, bricks, metal scraps, marbles, well designed concrete floors and containers. Most respondents are concerned with parking space,
amenities and furnishing. Building materials had been heavily imported in Nigeria; today developers have to look inwards and build with homemade raw
materials. Government’s primary housing objective is in the affordable homes segment thus its involvement in luxury is naturally limited but can only make land
acquisition process and building approval easier and more affordable.
The cost of land is also one of the contributing factors to price of luxury homes. Developers may have to either build more terraced and semidetached houses to
limit land space in high-brow areas or relocate the building of luxury estates to places with lower land prices and good infrastructure. A proper mix of building
materials, flexible payment options, good use of land space and location is the only way to go in making luxury attractive to a Nigerian buyer today.

3. 1.4 SURVEY RESULTS
The demand for luxury homes in Lagos, is generated locally than from foreigners with 85% of luxury home buyers currently residing in Nigeria. A expanding class
of high income earners driven by increased earnings and investment in new markets. Luxury homes are best sold to entrepreneurs and high wage earners in the
private sector. Outright payment is the most popular payment method; this is connected to low mortgage activity and high interest rates from mortgage lenders.
2%
88%
10%
What is the origin of most luxury home buyers or renters in Lagos?
Japan Nigerian United States
15%
85%
Where do the buyers currently reside?
Currently reside abroad Currently reside in Nigeria
62%
6%
32%
Occupation of most clients
Entrepreneur Government salary earner Private salary earner
1%
15%
23%
40%
20%
What is their preferred payment plan?
Milestone Monthly Installment Mortgage Loan
Outright purchase Quarterly installment

4. Outright payment appeals more to entrepreneurs than it does for wage earners in both private and government sectors. A growing need for flexible payment
methods has led to increased total demand for installment (monthly or quarterly) between both business owners and private workers but the supply of such
options is relatively low. Mortgage is the least used payment method by buyers who are mostly Nigerians. 48% of buyers earn at least N500, 000 monthly.
Most luxury home buyers are considering purchase or rent are doing it for the first time and a large majority of buyers are in the market for inestment.
1
17
10
30
2 2 2
14
10
6
0
5
10
15
20
25
30
35
Milestone Installment Mortgage Loan Outright purchase
What is your preferred payment plan?
Entrepreneur Government salary earner Private salary earner
17%
17%
15%
2%
48%
Monthly Earning of Buyers
Above N3,000,000 N1,000,001 - N1,500,000 N1,500,001-N2,000,000
N2,000,000-N3,000,000 N500,000-N1,000,000
25%
8%
64%
3%
% people considering a luxury home purchase or rent?
Experienced Buyer Experienced Tenant First-Time Buyer First-Time Tenant
61%18%
21%
Why buy a luxury home?
As an investment Recent career or business success As an owner occupier

5. Most luxury buyers are willing to pay a maximum of N100M to own a luxury home and with that their top 3 needs are parking space, fully serviced homes and
furnishing.
96%
4%
Would you rather buy or rent a luxury home?
Would rather buy Would rather rent
85%
15%
Most luxury home clients are
Already home owners Tenants
4%
14%
63%
8%
10%
How much are buyers willing to pay to own a luxury home?
Above N500M N100M - N200M N100M at most
N201M - N300M Not Applicable
28
26
18
34
25
1 1
0
5
10
15
20
25
30
35
40
Fully
Serviced
Furnishing Jacuzzi Parking
Space
Swimming
Pool
Garden Library
Most desirable features buyers want in a luxury home?

6. MOST DESIRABLE LOCTION FOR BUYERS INCLUDE LEKKI, VICTORIA ISLAND, IKOYI, IKEJA GRA, BANANA ISLAND, AJAH AND SURULERE

7. Most buyers are looking for detached houses and apartments although they are only willing to pay N100M at most, they may not be able to afford a luxury
detached duplex with all the amenities they prefer at that rate. A luxury detached house is priced from N120M - N600M and that excludes the associated cost of
maintenance. Semi detached houses cost 20% less than detached houses and offers privacy and comfort for married couples.
Luxury developers, when asked about the demand for luxury properties considering the economic downturn Nigeria is faced with, 70% say demand has fallen.
4%
70%
15%
4%
7%
How much are buyers willing to pay per annum to rent a
luxury apartment?
N10,000,001-N15,000,000 N3,500,000-N5,000,000 N5,000,001-N7,500,000
N7,500,000-N10,000,000 N1,000,000-N1,500,000
66%
8%
26%
Are buyers willing to go beyond your budget?
Not at all Yes, but only 10% - 25% more Yes, but only 5% or 10% more
29%
37%
16%
18%
Type of luxury property most buyers are looking for?
Apartment/Condominium Detached houses
Semi Detached Houses Terraced houses
70%
10%
20%
Has demand for luxury residential homes increased or fallen
since the dollar appreciated vis-a-vis the naira?
It has decreased It has increased No change

8. Why has demand fallen?
The chief reasons why demand has fallen includes a naira devaluation, a soaring exchange rate in the black market, economic downturn and high prices of luxury
homes makes it very expensive for the buyer whose purchasing power has fallen. Luxury homes are usually rented and priced in dollars and the people can no
longer afford to pay for high rise apartments. The CBN has recently banned transactions made in US dollars to protect tenants from excess charges.