[Column] Ugo Arinzeh: London - an attractive real estate destination for Nigerians
In 2014, Nigeria became Africa’s largest economy, reflecting a decade of sustained economic growth based on a more diverse, service-orientated economy that is less reliant on oil revenue. Many see this expanding consumer-driven and entrepreneurial population as the ‘engine’ behind Nigeria’s continued growth, which will continue to create wealth opportunities for a growing number of its citizens.
Here in London, the impact of Nigerians on the economy is significant. London has long been a ‘go to’ destination with 142,000 Nigerians travelling to the UK in 2011 (an increase of 50% since 1991) and spending an average of £107 per day, according to the Office of National Statistics.
In the property sector, there is increasing Nigerian investment in many of the most exclusive neighborhoods, including Knightsbridge, Mayfair and Belgravia. Our research shows that Nigerians have bought over £600M worth of property over the past three years in these areas alone. Harrods Estates’ Mayfair office recorded a 400% increase in Nigerian purchasers of prime central London property in the 12 months ending March 2015 as compared to the prior year period. The majority of these clients are spending between £2.5M to £6.5M on two to three-bedroom apartments to stay in while visiting London, whether for business or pleasure. Christie’s International Real Estate reported a 12% rise in the number of Nigerian buyers purchasing property in the £10M plus category over the past 12 months.
Folorunsho Alakija, an oil tycoon and fashion designer who, according to Forbes, is the richest self-made woman in Africa and one of just two female billionaires on the continent, is a major investor in London, having recently purchased four apartments in ‘One Hyde Park,’ an exclusive Knightsbridge development.
So, what is so appealing?
London, as a capital city, is a major financial and commercial hub and its reputation as a secure residential property market is particularly attractive to Nigerian investors. Additional incentives include the free flow of capital allowed in and out of the UK, the relative ease and administration of property purchases, transparent and respected title transfers, and the relative stability of the British pound. As a diversification strategy, a UK property offers investors a sensible means of managing risk by shifting reliance on naira-based investments and assets. London is also considered an easy place in which to do business, certainly in comparison to some of its European neighbours. With London properties experiencing significant price appreciation over time, in many cases doubling every 10 years, investors have earned a solid return.
In the case of currency stability, since 2013 the naira has devalued against the pound by approximately 20%. On the 1st November 2013, one pound equaled 252.78 naira, versus 304.86 on the 31st of October 2015 (xe.com). Although this has made buying London property more expensive for a Nigerian investor, a pound supported asset is better insulated from currency risk and fluctuations. While property is considered an illiquid asset, given the shortage of housing stock compared to the demand, selling a property that is priced right should be relatively easy.
As a long term property investor myself, one of the reasons I find property investment so compelling is that there are few investments that you can acquire without having to fund the entire purchase price outright. Banks are currently providing mortgages in the range of 60% - 85% of the purchase price, which means that a buyer only has to come up with a fraction of the total investment. Several African banks here in the UK will lend to Nigerians who meet their strict criteria. Their rates will be higher than a UK bank for British nationals, but they are certainly more competitive than what banks offer in Nigeria, where interest rates are typically in the range of 18% to 25%.
As a Commonwealth country, Nigeria enjoys a history of strong ties with the UK. The well-established Nigerian community currently living in London ensures both cultural and professional networks will thrive within a vibrantly diverse society. The Office of National Statistics estimated that in 2013, 181,000 people born in Nigeria resided in the UK. With so many Nigerians already living here, Nigerians travelling to the UK now will feel quite comfortable seeking a base in this country.
The English educational system is also a strong reason for Nigerian families to favour life in London and the UK. Many Nigerians are now the second and third generation to have attended UK boarding schools and universities. Higher Education Agency data indicates that 17,620 students from Nigeria were studying in British higher education institutions in the academic year 2011 to 2012, and that they are the third largest group behind the Chinese and Indians. Many families find that once their children are studying in the UK, it makes sense to have a family base here to spend half term and summer holidays.
What are current property investment trends?
One interesting trend is that the Nigerian buyers are more likely to be purchasing homes to live in as opposed to other overseas buyers, who are seeking high-end buy-to-let investments, or even allowing properties to remain vacant long-term. London’s grand period houses will always attract overseas buyers, including Nigerians, and the exclusive areas of Knightsbridge, Belgravia and Mayfair, are highly sought after. Physical security is important to Nigerian investors and gated developments, 24-hour security, concierge services and private parking often must-have requirements.
For new developments, One Hyde Park has attracted many Nigerian purchasers. Imperial Wharf, adjacent to Chelsea Harbor, is another sought after investment location favoured by Nigerian buyers. Apartments and penthouses located in this beautiful, tranquil and well-appointed development, moments from the vibrant Kings Road, are being snapped up as soon as they are released onto the market. In many circles it has been dubbed ‘mini Lagos’, reflecting the significant Nigerian presence.
The new-build market is becoming more and more desirable as it offers easy maintenance and upkeep, particularly if the buyer will only be residing there part time. Nigerians are also realizing the investment potential of these new developments, not just as second homes, but also as buy-to-let investments. We are currently searching for property for several clients seeking good returns and yields who are therefore willing to look beyond the traditional areas of central London. We recently bought two flats in a nine-unit development in Hackney, east London, for a client. By purchasing more than one unit, we were able to secure a significant discount and have since rented out one unit and sold the other for a sizable return. In this case we recommended east London for its ever-increasing popularity with young professionals and proximity to the city of London.
While there is no crystal ball to predict the future, the UK - particularly the London property market - suggest that it will continue to be a sought after destination for Nigerians, particularly due to the long history and familiarity with this country. As with any investment, we recommend that significant research and study go into developing a strategy. Careful analysis is essential to secure properties that are suitable as a secondary residence or a buy-to-let investment when building a property portfolio. London offers countless neighbourhoods each with a different feel, energy, housing stock and price point for consideration, which is part of the beauty and appeal of this capital city.