THE FUTURE IMPACT OF DIVORCE ON HOUSING

On the surface, it does not seem like divorce would cause such a great impact on housing. However, when you think about it a little more closely you start to see how it is already affecting housing provision around the world.  Divorce rates are rising alarmingly and with so many families being split up, it is only logical that more homes need to be provided and also smaller homes. For couples who “manage” to stay together for social or religious reasons, the two of them together are often beneficially greater than either one of them independently. While one of them may have health issues, the other may be strong enough to help with support and medication. In a sense, no matter what the faults or weaknesses, with a two person partnership it is far more likely that the two will be able to live independently in their one home for far longer than if it were just one of them. Once split up, each partner would require a great deal more support which would mean an increase in medical care and finances that could be quite significant and unavailable. It is sometimes pitiful when you visit an old uncle or aunt who used to be very vibrant and mobile back in their day and to see what has become of them now that they are alone living with a houseboy or housegirl or even a distant distant relative who has no real interest in their welfare other than pocketing the money that the kids who are spread far and wide, send home from time to time.  This is a growing problem and in the next few years will reach epidemic proportions. In Nigeria we have not really noticed the impact on housing yet because the older generation still manages to live in their old family homes which are decaying around them with no one to maintain them. Of course immediately they die, the kids sell the property to the highest bidder. If this family home is on a large plot of land in Ikoyi, Victoria Island or Ikeja, you can bet that in an apartment block will be put up in its place

Younger divorced couples are now buying or renting homes and apartments on serviced estates where essential services like security and power are provided, apart from their personal care. In the next few years we may need to consider going the way of other developed countries and building retirement homes for the growing divorced aging population. Abroad the Governments have already taken notice of this increase in divorce rates and have invested in research into understanding the increase as well as preventing its continuation. Many are stating that the UK Government needs to start investing in saving marriages if it has any hopes of keeping its current enviable housing and care system manageable!

Whatever the cause of this increase in divorce, the ramifications are clear; the housing sector will be severely affected should this trend continue. That being said, although Nigeria is not a “welfare friendly” country, it may be wise for the Government to start to look into ways to help ease the growing problem of divorce and its future impact, otherwise there may not be enough resources to sustain the looming housing provision for as long as it will be needed. This growing problem is something that should taken up by media and overall society awareness, especially as our health care system already cannot support all the strains being created simple health demands, not to talk of increasing health issues. In the UK, the Government has tried to ease the pain of home ownership for all by starting “The Help to Buy Mortgage Scheme” which program allows people to buy homes at a much reduced interest rate of something like 3%. It comes in two different varieties. The first of these is the interest-free loan opportunity. The second allows the Government to function as the guarantor for a portion of the borrower’s debt. The mortgage guarantees provided by “Help To Buy” are open to first-time home buyers as well as home movers. The purpose of this part of the program is to help those buyers who do not have enough money to put down as a deposit on their home. If this is the only thing preventing the borrower, the “Help to Buy” program will help to raise enough money for the initial deposit. In Nigeria it is unfortunately a case of “everyman for himself and God for us all” with no Government intervention, unless steps can be taken NOW to redress what is already a growing problem. Even with the rate of construction by private developers, it will not be enough to meet the needs of what is coming ahead. As the say “to be forewarned, is to be forearmed”

LEAVING INHERITANCE PROPERTIES, A DYING TREND

We all know of the tradition of parents leaving properties and large sums of money to their children in their wills when they die? Well it appears that this long held tradition is on its way out in the UK and USA and certainly is spreading to Nigeria. Many parents are still making huge financial contributions to support children and grandchildren even into adulthood due to current financial difficulties.  As people are living longer in many other parts of the world (apart from Nigeria it seems) they are spending more to support their lifestyles and retirement.  Many wealthy over 60s are travelling the world and treating themselves to luxuries they could not afford when they were younger. Bill Gates the owner of Microsoft and one of the wealthiest men in the world has famously said that he intends to spend all of his wealth and give very little or no to his children because he does not want to cripple them as he has already equipped them with good education and training. He wants them to know what it is like to work for their money and achieve their own wealth and have a sense of pride in what they do. Here in Nigeria, we hear so many cases of children fighting for many years after their parents have died, over one house or the inheritance that the parents have left them. Again in Nigeria, we frequently have families where there is more than one wife or numerous children from various women, which makes it a nightmare to share the inheritance left behind. Often you find the first wife trying not to let the children of the other “small” wives get their hands on the man’s inheritance. But it seems this is becoming a thing of the past as the older generation now need to use their money to fund their own retirement.

It is perhaps not something you hear about in the media every day, but statistics show that the divorce rate among retirees (over 50s) is increasing rapidly. Whenever we talk about divorce rates or couples separating, we typically focus on the impact that the divorce will have on the couple’s children. Very rarely do we discuss the impact on the individuals themselves, or on their healthcare and living needs. This is an issue that has been growing for a few years now and is now at a point that requires attention and action to prevent our society fragmenting into copy cat versions of developed societies which are already having problems catering for a rapidly ageing population with no obvious financial means of supporting themselves. Whatever inheritance that would have gone towards children, is now being diverted to cater for the needs of the parents. In the UK the divorce rate for couples over the age of 60 has grown by an amazing 30% just in the last ten years. Furthermore, there has been an increase in the number of elderly over age 75 that are now living alone. In terms of pressure on the care system, this could mean that adult social care costs could increase at a staggering rate, especially if divorce rates continue to increase in the same way they are now.

There is an ongoing argument that children are becoming even more reliant on their parents to help and support them financially for longer. Of course, there are a variety of different schools of thought related to why this is happening. One reason is the decline in our education system, the societal decay and the lack of jobs One thing to keep in mind when discussing the evolving family make up, is that not every parent manages their parental responsibilities in the same way or have the resources to support children or even themselves, and even furthermore, parents can really only do so much to manage how their children react to the everyday struggle of real life. That being said, adult children will essentially live their lives as they see fit, whether it was the way in which they were raised or not. Perhaps one of the biggest things to keep in mind when focusing on how children have grown to be so reliant on parents is the way in which parents now help their children, which is quite different from years and decades passed. The method of helping has certainly evolved and has grown to include much larger expenses and costs. It is no longer just that parents give their children a car for their birthday when they have reached the age old enough to drive. Now, parents seem to be taking financing to a new level. Some parents are even taking on the responsibility of using their own properties as guarantors for mortgages for their children or even giving the children their savings to buy land or property to support them. This is a growing problem

THE RISING GROWTH OF SHOPPING MALLS

There seems to be a rapid increase in the building of shopping and entertainment Malls springing up in Lagos and major cities in Nigeria. They range from large properly constructed malls to small unregulated malls. In Lagos alone we have seen at least twelve large major malls spring up in just a few years and hundreds of smaller ones. On the Lagos Island we previously for many years just had two major malls, Silverbird Galleria and The Palms which came with cinemas and food courts, many smaller shopping outlets like Mega Plaza and Lafayette mall were also trailblazers. Now all of a sudden, everyone is building shopping malls on every little space they can find. Just take a drive along major roads like Adeniran Ogunsanya in Surulere which also houses a large Shoprite, go to Opebi and Allen Avenue in Ikeja, drive along the Lekki expressway and Admiralty Road in Lekki 1, you will be shocked to see how rapidly residential homes are being converted into every kind of mall imaginable. Some of these malls have been so haphazardly converted, that you are unsure what is behind every door unless you enter. The stairways are poorly lit and there is usually insufficient sanitary provision even where there are restaurants. In the major shopping malls I can already see the signs of a breakdown in facility maintenance, like cleanliness of the public spaces and toilets, broken toilets, Air conditioners always not working, poor security, broken floor tiles, blown light bulbs etc. The list is endless. Last year I went to a major mall to watch a film and the air conditioners in the cinema hall was not working, it was like an oven, the toilets were locked because they was no water in the mall. You can never find that happening abroad. Take a trip to the Adeniran Ogunsanya Shoprite mall and you will be shocked to note that this is a recently built mall. It is dark with endless corridors not sign posted and empty. It feels like you are in desolate dark world that you see in Sci-Fi movies. It is really a strange place. Unfortunately a lot of so called “malls” do not have planning permission and have not been constructed/converted according to any architectural plan. The main reason for these malls is purely financial and not longevity, therefore many of them shut down in a couple of years.

Shopping Malls are really modern, indoor version of traditional outdoor marketplaces where we now have lots of different shops clustered together to form a network of shops under one roof.  Malls provide all sorts of convenience like time saving, safety, car parking and a calm environment that smaller shops may not be able to provide. There are a few advantages and disadvantages that need to be taken into consideration. The most noticeable advantage that Shopping Malls provide to the community is the ease of shopping for the consumers. There are usually car parking spaces available, security cameras in almost every shop to ensure that criminals are caught, moreover, there are security guards at every entrance and exits to the Mall in order to maintain a safe environment. In addition the creation of competition in one place can also helps to provide a better range of products and choices for the customers. Shopping malls are usually air-conditioned which is always beneficial from the heat and stress that you get in outdoor market places. The disadvantages are the high rents that some of the larger malls command without the attending customer traffic to buy their goods, leading to a short life span for businesses and loss in profits. Prices also tend to be inflated to take into account the rent, service charge and staff outlay. Malls also encourage people hanging around for needlessly prolonged periods. The security in large malls needs to be really good owing to the large traffic under one roof at any point in time. There can be serious implications if a mall is targeted for criminal activities.

There are lessons to be learned however from America where Mall business started and is such a part of the society there. Unfortunately due to the proliferation of malls in the US some malls in some states there, are being closed down due to lack of customers and are being turned into homes for the community after consultations with community leaders. There were too many malls in close proximity providing more or less the same goods. You can already see that this is happening in some areas here, as you may find that out of twelve shops in a small mall, six are selling clothes albeit different prices and quality, but how many shops will attract customers unless it is already known or a branded name. New areas are daily sprouting new malls and I do not foresee this unchecked growth slowing down anytime soon

PAYMENT OF AGENCY FEES, A CONTENTIOUS ISSUE

Why is it that when it comes to paying Professional fees, whether Agency, Legal or for any service, people seem to develop a deceptive personality?  I cannot count the number of times a client has asked us to find, sell or lease a property for them and after the job is done, has developed all manner of avoidance tactics not to pay the agreed fees. It does not matter how respectable or rich the client is, you still come across these clients performing disappearing acts after the job has been completed. I had a client who wanted to dispose of some family land and approached my company to do this. We shortly after found a buyer, that same evening my client rang to say that he wanted half of our fees, for introducing us to “his family land” but we should not mention this to his wife! I had a meeting in the office the next morning to discuss this development and we agreed that as the fees were quite healthy we would negotiate and give him a percentage. He agreed to this and we proceeded very uneasily. As the buyer was about to close on the transaction in the seller’s offices, the wife of my client summoned me to her office, to tell me that she would only be paying 1% of our fees regardless of what had been agreed in writing at the beginning of the transaction. She said she was just notifying me out of “politeness” To cut a long story short, the buyer overheard all this and decided that they were going to pull out of the purchase as the sellers had shown themselves to be untrustworthy. That was the end of that brief.

On another occasion a Judge called us to view one of our advertised properties, upon getting there, she met the developer who I had worked on many projects with and was a trusted colleague. Whist he was taking us around, she started asking him questions and found out that he knew her family. To my shock, the developer called me a few days later to say that the lady had called him and gone back to the property on her own to persuade him to cut my company out of the picture and deal directly with her! A judge? So who do you trust, when even the legal system is crooked?

Fee paying also seems to turn some other people into greedy opportunists, who expect a huge portion of the fees just because they introduced the brother of the cousin of the person who wants buy the property, to you. Some staff in offices, who have engaged your services to find accommodation for senior staff members, calls you day and night for a cut of your fees even though they are getting paid a salary. An example is a brief we got to find accommodation for some expatriate staff for a multinational company. I started getting calls at 10pm and 11pm from a certain member of staff in their finance department, urging us not to forget him and to remember that “this life is unpredictable and we shall all meet somewhere else so we should always do good”?  This member of staff had nothing to do with the lease transactions other than being aware of it. These calls kept coming in steadily every night for about a week, until I told him that I would sort him out. If you ask the gateman for access to a property, he expects to get a cut in your fees. Even your driver wants a cut, so at the end of day you may end up with hardly anything worthwhile in your pocket. People imagine that realtors, must be raking in tons of money daily and therefore need a share of the fees for doing nothing other than greeting you.

Some Agents also feel that they should collect fees from everyone involved in a transaction, the buyer, the seller, the tenant, the agent and whoever else they can get from without the other party being aware. These types of quack Agents give professional Agents a bad reputation and do not seem to care about the distress they cause to the people they are collecting monies from. It has become a way of life and a culture in Nigeria that everyone wants a cut of your cut, just because they can. If God forbid they are in a position to jeopardise your payments if you don’t give them a cut, then you are in trouble. A messenger in a company demanded a cut from the realtors and ensured that he did not get their cheques delivered to them on the Friday before the banks closed, until he was “sorted out”

As most will testify in this profession, the ears have heard, and the eyes have seen more than the mouth can say

TENANTS LEGAL RIGHTS

A couple of years ago Lagos State brought out a law to protect tenants, The Lagos State Tenancy Law.  The question on many people’s lips today is, is the law working? It is difficult to answer this question as I know that if you speak to ten people, you will get ten different perspectives. I guess that in itself is an answer that the Tenancy Law is not as cohesive as it should be. In my opinion as a property professional, the Law is not being followed to the letter, I guess this is because it is difficult to implement some of the requirements ie collecting only one year’s rent in certain areas and not in others. This creates confusion for landlords and tenants who cannot understand why Lekki should command one year’s rent and Victoria Island, two years. Some landlords, who are paying off mortgages, really cannot afford to take one year’s rent as they need to service their mortgages. Landlords will tell you that if the tenant cannot pay the two years or more rent that he wants, they are welcome to go and look for a property elsewhere that accepts one year payment. The landlord is well within his rights to decline a tenancy as long as monies and an agreement have not been exchanged, which can be tendered as evidence in a court of Law

A Tenancy Agreement must be given to each and every tenant before allocation of a unit of accommodation is made. All laws, rights and obligations must be stated in the Agreement. The Agreement must be read and signed by both the landlord and tenant, and the tenant should receive a copy of the Agreement. Landlords should provide the tenant with sufficient time to read the agreement and raise any questions they have before signing and agreeing to the terms. The landlord is also required to provide the tenant with their full name and address. All tenancy agreements should state the parties involved, the rental price, any deposit retained by the landlord, the property address, the start and end date of the tenancy, and the obligations of the tenant and the landlord.  All tenancy agreements must comply with statutory law. This is law that is enforceable by the judicial system and is therefore legally binding regardless of what is stated in the tenancy agreement. With all tenancy agreements there are rights by law for both landlord and tenant; even though these may not have been discussed between both parties in advance, they apply to all tenancy agreements.

The rate at which court decisions are made for the eviction of illegal occupiers is so slow, as they end up staying rent free for up to a year or more before a judgment is made. There is therefore a lack of confidence in the court system. The Property law is of course open to corruption and unregulated practices when one or all parties involved, try to cut corners. Agents who are mentioned in the Tenancy Law also give the business a bad name by going behind the backs of their main client and collecting fees from both parties. Some landlords will go with whoever closes on the property and not who they appointed and blatantly tell you that they owe no one any allegiance, therefore the property market regulations are really subject to the honesty of those involved in its practices.

A lot of tenants are still not aware of their rights and therefore get bullied by landlords who increase rents without notice or because they have received an offer of higher rent payments or they tell the current tenants to leave the property before their lease expires. If the tenant does not move out or increase the rent to match the offer being given by the landlord, they are asked to leave. Most tenants resort to begging the landlord instead of taking the matter to court. Sometimes Agents capitalise on this by demanding exorbitant fees and higher rent from the tenant in order to assure them of getting a sought after property. The responsibility of carrying out repairs is another area where tenants and landlords are not clear about responsibilities. Some landlords feel that a tenant should take their property in the state of disrepair as it is advertised and fix the repairs themselves. This is wrong! Some tenants carry out all sorts of alterations and works to their rented property without consulting the landlord. Both actions are wrong and can be taken to a court of law for resolution.

What is needed in the property market is closer monitoring of practices and instant enforcement of penalties from the monitoring agencies for those found breaking the law.

IS YOUR RETURN ON INVESTMENT HEALTHY?

Return on Investment (ROI) is very important when calculating profits on your property investments. Real estate return on investment, is a simple way to determine whether any given property purchase will yield a significant profit. Before you start the process of investing, be sure to gather all relevant information, such as what the rent payments, service charge payments, any property costs such as taxes and insurance fees and the original amount of your investment will amount to

A lot of investors set out to buy properties only thinking of the rental income, conveniently forgetting the amount they spent on building or buying the property, forgetting the amounts they spend on purchasing the land, all levy’s and all other charges if on an estate, forgetting the amount spent on putting in fittings in the property and other improvements. Many so called property developers and investors do not realise that they end up spending far more on their properties than what they can gain back in profits for many years to come. The first thing any wise investor should do is determine what their investment gain will be. Unlike profit, an investment gain tells you how much you receive before subtracting expenses. Determine how much you will receive from your investment on an annual basis. I will use a very conservative simple example although it is almost impossible to find good properties for this price in any city in Nigeria. Let us say you make N1.2m rent per year on a property you bought for N10million. The rent is your gains.  Add up all investment-related expenses. For example, if you are required to pay any taxes or insurance, be sure to include these figures. Repair costs are another important factor to consider. Let's say you spend N100k per year in taxes, N50k in insurance and N50k in other expenses. Add these figures together to get your real cost of investment. In this example the total cost of investment totals N200k. Subtract the cost of investment from the investment gain. N1.2m – N200k = N1m. Divide this number by the total cost of your investment. For example, since you bought your investment property for N10m. The calculation would look like this: N1m ÷ N10m =0.10. Convert the decimal into a percentage. In this example, this would be 10 percent. This means that you will receive a 10 percent return on investment each year from your real estate, which is an extremely healthy profit anywhere in the world. Anything over 7% should be aimed for, although many do not achieve the correct figures due to their micalculations.

Some estates along the Lekki Expressway axis sold their units for N24m –N30m about four years ago, these same units are going for N40-N55m today and climbing. As you can see, minus all charges these units have almost doubled in prices giving the owners over 30% ROI without them even lifting a finger. This can be likened to them winning the lottery! If they had bought two or more units, they will be laughing all the way to the bank. Wise investors will reinvest their profits in order to maximise their earnings. I get told all the time that these rapid increases will soon stop as the properties cannot be worth that much, but as a property speculator, I will not say that an investor should not buy or build just because they feel that the price increases will stop. There is a saying that “bricks and mortar” are the best way to save and grow your money anywhere in the world. Even if there is a property slump for a period, it will always appreciate again after a few years if one remains patient. Nigeria’s property boom is relatively new and will continue to grow for many years to come. The UK and the USA have been through many property rises and falls and have always come out of it better than the last. Of course there are some people who are just speculators and want to turn over their investment fast and see property buying and selling as a business. The location you buy in is the most important factor in buying for investment, as you will want the property rented out immediately and permanently, therefore the property will need to be accessible and near  amenities and infrastructure, it helps if it is serviced as well. This is unless you are building your dream country home in a remote part of your home town, where you can indulge your hears desires and have no worries about the property being empty for long periods and not earning an income from it..

Be a wise investor!

CUSTOMER SERVICE IN THE PROPERTY MARKET

This is one area that sadly needs a lot of improvement. With the property market flooded by Agents who have little or no training in Real Estate or even Customer Service, it is inevitable that service given to prospective clients is usually below acceptable standards. I guess the question that springs to mind next is “what acceptable standards?” The Lagos State Government has done a lot to bring some regulation into the property market, but without proper enforcement and provision of information, neither the Agent nor client is equipped to deal with poor service.
Ask any CEO of a company, Managing Director of a bank, manager of an office, telecoms company or even a tailor, and they will tell you how important the customer is to their operations and success. How you define service shapes every interaction you have with your customers/clients. Limited definitions of service based on an exchange of monies for goods or service misses the overall point of customer service. “Service” should provide the customer/client with more than a product or action taken on his/her behalf. It should provide satisfaction. In essence, the customer/client should walk away pleased at the result of the transaction – not just content but actually happy. A happy customer will continue to be a buying customer and a returning customer. Agents seem to think that once just one sale or lease transaction is completed, they are successful. They don’t realise that if the client is happy, he will refer other people to them and maybe even use the same Agent again.
 
Customers, buyers and clients who want to put their hard earned money into property investment will want to pay a fair price for quality service and outcome, and feel satisfied they have paid for a service/product and received what they have paid for in return. They also want someone to take care of them by guiding them in the right direction. They need someone to understand their needs and help answer them. They need someone to hold their hands and walk them through a process. Customer service starts with the ability to listen to the customer and find out through polite questioning what he/she needs or wants. From my experience some clients are unsure of what type of property they want and may give the Agent one specification, which the Agent runs around trying to meet, only to hear that the client as closed a deal on another property that did not match the original specification at all. The Agent therefore needs to have a wide choice of properties around the client’s specification and guide them or suggest other properties that may meet their needs. This requires a skill and thinking “outside the box” which is sadly lacking.
Customer service and contact with a client mean that the client must be heard and his/her problems will not go unanswered or ignored. It also means getting to know your client, his/her likes-dislikes, ideas, background, etc.

The other most important aspect to do is to listen to what the customer is saying. If people do not understand what is motivating the customer, they will not be successful in handling them or finding the right property. Do research on customers, their habits, and what they want and expect.
One common denominator among all companies or organizations that provide good service is the development of a system and attitude promoting customer friendly service. By “customer friendly” this means viewing the customer as the most important part of your job. The cliché, “The customer is always right” is derived from this customer friendly environment.
The two main tasks of successful customer relations are for the Agent to communicate and develop relationships with the client. This does not take a huge effort, but does not happen instantaneously either. Positive dialogue/communication with your customers and developing ongoing relationships with customers/clients are perhaps the two most important qualities to strive for in customer service, even if it is just ringing up from time to time to see how they are or letting them know what’s new on the market.  Agents should remember that good customer service results in consumer satisfaction and return customers and growth in business. Poor customer service, except for monopolistic businesses like PHCN, generally results in consumer dissatisfaction, poor reference, lack of returning customers and diminishing business. What is needed for property professionals is to invest in training for Agents and their staff if they are to maximise their business potential and earn a respected name in the market