Markets

Why You Should Buy a Property Now

Published

7 years ago

January 10, 2017

Why You Should Buy a Property Now

Real estate has always been an investment of choice to many astute investors. Even investors without experience seem to know that this is a good investment vehicle. The major reason for this frame of mind is the general belief that real estate always goes up and as such, you can’t get it wrong. While this is not entirely true, the natural tendency is to invest more in real estate when the economy is doing great. But when the economy is not doing well, people tend to change their focus. However, in my opinion, this is the best season to buy a property if you can afford it.

There are several reasons why you should consider buying a property now. The first reason is that property is your best hedge against inflation. The rate of inflation in the past 12 months has been astronomical. If you have money kept in a bank account, the value of what you could buy 12 months ago has been seriously eroded. Those who move their money into real estate are better protected against inflation. Real estate has the advantage of retaining value and appreciating to such a degree as to help you recoup any lost value.

Due to the scarcity of funds, many people have resorted to selling their property at a discount.

This means that when you buy a property now, you are essentially buying at less than its actual value. The current price is not likely to reflect the future replacement cost that inflation and devaluation have caused. Since the property market and the economy usually go in cycles, there comes a time when the market will begin its upward swing. If you decide to cash in on that time, you are likely to make a reasonable profit on your investment.

In addition, in a period of uncertainty such as the one we have found ourselves, it is prudent to avoid investments that are uncertain or volatile.

The stock market and foreign currency trading fall within this scope. While huge profits can be made overnight in these markets, your entire investment could be wiped out in a few hours. These investments are affected easily by economic policies, political risks and other factors outside the control of the investor. The real estate sector is relatively stable because it responds very slowly to these factors. It is unusual for a property to lose all its value or a significant value of up to fifty per cent no matter the economic trend. If you want to spare yourself the hassles of reading charts and reports as well as having many sleepless nights, I think you should seriously consider investing in real estate.

Another reason why you should consider this option is the fact that this is now a buyer’s market. The number of people interested in selling their property has outnumbered those willing to buy. In a buyer’s market, many trends are in a buyer’s favour. Sellers are generally motivated to sell, which helps to reduce transaction time. Sellers are willing to sell at a lower price than when it is a boom market. Sellers are willing to consider or offer flexible payment terms. In a buyer’s market, you can make low offers and request for installment payment.

Furthermore, the banks are usually faced with high default rates when it comes to loan repayments. Since most loans are secured by properties, once default rates increase, banks are quick to foreclose on such properties. If you consider the fact that the market is already flooded with private properties, the availability of foreclosed properties will further depress the market. Banks are generally interested in recovering their money and not in selling a property at the best price possible. Banks are only interested in the forced sale value of the property. The net result of this is that buyers have access to cheaper properties.

While I do not recommend this option, banks may also be willing to provide you with loans if you meet their criteria. The only challenge at this time is that the current interest rate regime is simply too high to stimulate any positive activity in the real estate sector. Ideally, when the economy is in a down mode, the interest rate should go lower in order to encourage people to borrow and invest. This is presently not the case but the funds are available if the numbers are right.

Finally, the overall perception is that after the economy has bottomed out or reached a certain low point, the only direction left to go is upwards. Real estate investments are usually a major beneficiary of economic recoveries. Most properties will start to recover their lost value and the prices of properties are likely to reach new highs. Those who invest now are going to enjoy the benefit of their foresight with huge returns on their investment.

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Samed Olukoya

Is the CEO/Founder of Investors King Limited. A proven foreign exchange research analyst and a published author on Yahoo Finance, Businessinsider, Nasdaq, Entrepreneur.com, Investorplace, and many more. He has over two decades of experience in global financial markets.

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Crude Oil

Dangote Mega Refinery in Nigeria Seeks Millions of Barrels of US Crude Amid Output Challenges

Published

3 days ago

May 16, 2024

Samed Olukoya

The Dangote Mega Refinery, situated near Lagos, Nigeria, is embarking on an ambitious plan to procure millions of barrels of US crude over the next year.

The refinery, established by Aliko Dangote, Africa’s wealthiest individual, has issued a term tender for the purchase of 2 million barrels a month of West Texas Intermediate Midland crude for a duration of 12 months, commencing in July.

This development revealed through a document obtained by Bloomberg, represents a shift in strategy for the refinery, which has opted for US oil imports due to constraints in the availability and reliability of Nigerian crude.

Elitsa Georgieva, Executive Director at Citac, an energy consultancy specializing in the African downstream sector, emphasized the allure of US crude for Dangote’s refinery.

Georgieva highlighted the challenges associated with sourcing Nigerian crude, including insufficient supply, unreliability, and sometimes unavailability.

In contrast, US WTI offers reliability, availability, and competitive pricing, making it an attractive option for Dangote.

Nigeria’s struggles to meet its OPEC+ quota and sustain its crude production capacity have been ongoing for at least a year.

Despite an estimated production capacity of 2.6 million barrels a day, the country only managed to pump about 1.45 million barrels a day of crude and liquids in April.

Factors contributing to this decline include crude theft, aging oil pipelines, low investment, and divestments by oil majors operating in Nigeria.

To address the challenge of local supply for the Dangote refinery, Nigeria’s upstream regulators have proposed new draft rules compelling oil producers to prioritize selling crude to domestic refineries.

This regulatory move aims to ensure sufficient local supply to support the operations of the 650,000 barrel-a-day Dangote refinery.

Operating at about half capacity presently, the Dangote refinery has capitalized on the opportunity to secure cheaper US oil imports to fulfill up to a third of its feedstock requirements.

Since the beginning of the year, the refinery has been receiving monthly shipments of about 2 million barrels of WTI Midland from the United States.

Crude Oil

Oil Prices Hold Steady as U.S. Demand Signals Strengthening

Published

3 days ago

May 16, 2024

Samed Olukoya

Oil prices maintained a steady stance in the global market as signals of strengthening demand in the United States provided support amidst ongoing geopolitical tensions.

Brent crude oil, against which Nigerian oil is priced, holds at $82.79 per barrel, a marginal increase of 4 cents or 0.05%.

Similarly, U.S. West Texas Intermediate (WTI) crude saw a slight uptick of 4 cents to $78.67 per barrel.

The stability in oil prices came in the wake of favorable data indicating a potential surge in demand from the U.S. market.

An analysis by MUFG analysts Ehsan Khoman and Soojin Kim pointed to a broader risk-on sentiment spurred by signs of receding inflationary pressures in the U.S., suggesting the possibility of a more accommodative monetary policy by the Federal Reserve.

This prospect could alleviate the strength of the dollar and render oil more affordable for holders of other currencies, consequently bolstering demand.

Despite a brief dip on Wednesday, when Brent crude touched an intra-day low of $81.05 per barrel, the commodity rebounded, indicating underlying market resilience.

This bounce-back was attributed to a notable decline in U.S. crude oil inventories, gasoline, and distillates.

The Energy Information Administration (EIA) reported a reduction of 2.5 million barrels in crude inventories to 457 million barrels for the week ending May 10, surpassing analysts’ consensus forecast of 543,000 barrels.

John Evans, an analyst at PVM, underscored the significance of increased refinery activity, which contributed to the decline in inventories and hinted at heightened demand.

This development sparked a turnaround in price dynamics, with earlier losses being nullified by a surge in buying activity that wiped out all declines.

Moreover, U.S. consumer price data for April revealed a less-than-expected increase, aligning with market expectations of a potential interest rate cut by the Federal Reserve in September.

The prospect of monetary easing further buoyed market sentiment, contributing to the stability of oil prices.

However, amidst these market dynamics, geopolitical tensions persisted in the Middle East, particularly between Israel and Palestinian factions. Israeli military operations in Gaza remained ongoing, with ceasefire negotiations reaching a stalemate mediated by Qatar and Egypt.

The situation underscored the potential for geopolitical flare-ups to impact oil market sentiment.

Crude Oil

Shell’s Bonga Field Hits Record High Production of 138,000 Barrels per Day in 2023

Published

3 days ago

May 16, 2024

Samed Olukoya

Shell Nigeria Exploration and Production Company Limited (SNEPCo) has achieved a significant milestone as its Bonga field, Nigeria’s first deep-water development, hit a record high production of 138,000 barrels per day in 2023.

This represents a substantial increase when compared to 101,000 barrels per day produced in the previous year.

The improvement in production is attributed to various factors, including the drilling of new wells, reservoir optimization, enhanced facility management, and overall asset management strategies.

Elohor Aiboni, Managing Director of SNEPCo, expressed pride in Bonga’s performance, stating that the increased production underscores the commitment of the company’s staff and its continuous efforts to enhance production processes and maintenance.

Aiboni also acknowledged the support of the Nigerian National Petroleum Company Limited and SNEPCo’s co-venture partners, including TotalEnergies Nigeria Limited, Nigerian Agip Exploration, and Esso Exploration and Production Nigeria Limited.

The Bonga field, which commenced production in November 2005, operates through the Bonga Floating Production Storage and Offloading (FPSO) vessel, with a capacity of 225,000 barrels per day.

Located 120 kilometers offshore, the FPSO has been a key contributor to Nigeria’s oil production since its inception.

Last year, the Bonga FPSO reached a significant milestone by exporting its 1-billionth barrel of oil, further cementing its position as a vital asset in Nigeria’s oil and gas sector.