In Nigeria, buying a car is regarded as a liability while owning a house is rated as a good investment. However, this line of thought was recently questioned by finance expert, Tayo Oyedeji who argued that homeownership is a bad investment if the purpose is to live there.
Oyedeji is an entrepreneur who feels renting a home is wiser than owning it. He gave an example of himself, stating that he owns few properties which according to him are a bad investment on his part.
Renting is wiser for most people. Don't buy a house unless:
1. Mortgage is < 8%.
2. You can pay cash.
3. You plan to live in it for 10 years.
4. You need the psychological comfort of home ownership.
Rental/investment property is great. Home ownership is mostly a bad investment.
— Dr. Tayo Oyedeji (@tayooye) November 12, 2019
Why people own homes
According to Tayo Oyedeji, most people own properties because of psychological comfort, societal expectations, and cultural norms, but when the finances or returns on investment are factored in, such mentality is a bad investment.
Oyedeji stated that investment shouldn’t be made based on emotion. This, he believes could negatively affect people. He said investment should be based on ‘Math’, meaning, finances and returns on investment should be considered, therefore, living in a home you own is a bad investment.
The finance expert expressed his thoughts through his Twitter account, @tayooye. He shared on his timeline that, “The home you live in is your worst investment. For some of us, it’s not even an investment. Don’t buy the hype, do the math. A home purchase for living is a bad investment.” He, however, said buying to rent is a better investment.
Reasons for Oyedeji’s stance
While defending his claim, Oyedeji opined that:
- An average property in Lagos is N40 million.
- Treasury bill rate is about 12%.
- Your N40 million will yield N4.8 million a year.
- You can rent a good home for N1.5 million and still have N3.3 million left over.
- Your house is costing you N3.3 million per year. Do the math.
In his reaction to one of the comments on his statement, Oyedeji said, “Homeownership is usually a bad investment in most places, even in the US. There are much better-performing asset classes and it limits your mobility.”
When and why you should buy a home
According to Oyedeji, individuals shouldn’t buy a home unless
- Mortgage is < 8%.
- You can pay cash.
- You plan to live in it for 10 years.
- You need the psychological comfort of homeownership.
Oyedeji ended his argument by stating that, “Renting is wiser for MOST people” = “Buying is a good option for SOME people”
Reactions that trailed his comment
Those in support of Oyedeji
There were Nigerians who were quick to support Oyedeji, stating that he wasn’t far from the truth.
It's the same in the US too. Unless you buy to rent out then it makes financial sense. Think about it based on assets and liability if you own it and it's not yielding returns its a liability. If you own it on mortgage and rent it out its an asset.
— Ooja Shop (@OojaShop) November 13, 2019
Your tweet makes sense. Once you live in your own house, it becomes a liability, it's no longer an asset. It stops yielding for you. Rather you spend to maintain it. Unless of course you pay yourself rent and who does that.. 😂😃
— Biola (@biyolah66) November 12, 2019
My husband taught me this maths a long time ago when we discussed about our investments but most people don’t know this. Housing in Nigeria is over priced . People are just too concerned about being a house owner and most people are not properly educated. Thank you for sharing
— Adaora Nnubia-Onyilimba (@ada_limba) November 13, 2019
Most middle class Nigerians buy houses because of the 4th reason. Thus, the mathematics or logic of investment will not apply to them
— Saadu Jijji (@saadjijji) November 12, 2019
I'll prefer a historical analysis. I grew up in a home that was purchased for N60k in the '80s roughly $80k or N29m in today's money. The rent for that amount of time would certainly be above N15m. So like you said if you plan to live in it >10years then own
— August visitor (@ENwokeafor) November 12, 2019
Context. In Zim home ownership is the way. Thats why even Kiyosaki is wrong about it in Zim context.
— Taita Kudzi (@kedukudzi) November 13, 2019
It goes back to what Kiyosaki said in his first books: A house is not an asset but a liability. According to him, a liability takes money out of your pocket. That's what your own house does. As your own car etc.
— Tobi (@TobiGbemisola) November 13, 2019
Thanks for sharing this Doc.
If you have N40m cash for an outright purchase then this tweet shouldn't bother you.
If not, how will you raise the cash, mortgage?
Here's why Doc said it's wiser for most people to rent…my maths, my experience 👇
— Eleojo Emmanuel (@EleojoE) November 13, 2019
Just talked about this topic with my wife less than 1hour ago. Same math.
— Abdulhakeem Adetunji Mustapha (@_amustapha) November 12, 2019
My dad was the first person to tell me this. He did the maths for me. And I agree that it’s not a good investment.
— Tobi Oyewale (@Tobioyewale1) November 12, 2019
Those against Oyedeji
Huh ? Renting basically means you are paying someone else’s mortgage ! Rents are almost ALWAYS less than your mortgage payments anyway. I don’t see the fin sense in renting if you are able to raise the deposit for a mortgage.
— Temi Fatusin (@Msfatusin) November 12, 2019
I beg to disagree Dr. I live in the U.S. and other than limiting your mobility, homeownership is much better than renting. Caveat- I personally don’t consider homeownership as an investment.
— Bode Akintola (@pakintol) November 12, 2019
I feel being rich enough to own a home should be the first and most important consideration. Paying rent all my life for me ain’t it.
— ʂɬ. ơცı (@chidi_bernards) November 12, 2019
Treasury bill in places like United state won't give you such return in a year. So it all depends on location with this maths. Thanks for the advisory role.
— BABS ISAIAH ABIODUN (@infinitybabs) November 12, 2019
Say you have a 40 million. You can definitely build a simple bungalow of 8-9 million and you have 30 million up for treasury bills. That way it’s a win win situation
— Idris-lawal🇳🇬 Pelican (@sir_whaless) November 12, 2019
This is definitely not for Nigeria! Home ownership here in Nigeria is ALWAYS A GOOD INVESTMENT.
— Davidadeola (@Davidadeola10) November 12, 2019
I just found out you don't stay in Nigeria, hence this tweet. No inhabitant of thus country will take this tweet serious, trust me.
— Davidadeola (@Davidadeola10) November 12, 2019
So…pay rent till I die vs pay mortgage for a couple of years, on a property that could appreciate and give a good ROI?
— Faith Ada Ochelle (@faithadaochelle) November 12, 2019
By Dec 2019, you won't be able to get treasury bill as an individual. U could chose to sell that home in Lagos in 10yrs at a much higher price depending on the location. How much rent would you have saved? What's the cost of land-Lord wahala and constant rent increase? How much
— Jonah (@jonahekpiken) November 13, 2019
Shoprite Nigeria is worth at least N25 billion
N25.6 billion price tag is only reflective of what Shoprite Nigeria’s operations is worth on paper.
Africa’s largest retail chain, Shoprite, announced on Monday that it is has decided to divest from its Nigerian retail entity, Retail Supermarkets Nigeria, the owners of Shoprite Supermarket Nigeria.
Going by several media reports and social media accounts, the sale is close to being consummated and a buyer is already in line to purchase the company. Getting information on the purchase consideration for this deal can be difficult especially if there are non-disclosure clauses.
For example, then Zinnox purchased Konga from Naspers (another South African firm) and AB Kinnevik two years ago, though the purchase consideration was not disclosed. However, we do not know what Shoprite Nigeria is worth on paper.
What is it worth on paper? Going by the company’s most recent annual report published in June 2019, Shoprite values its equity in its Nigerian subsidiary, Retail Supermarkets Nigeria Ltd at R 1.164 billion (1.1 billion rands). This translates to about N25.6 billion using the official exchange rate. This is also an equivalent of $67.7 million. The exchange rates are modest and will certainly be higher if the transaction was to be at this valuation.
However, the N25.6 billion price tag is only reflective of what Shoprite Nigeria’s operations is worth on paper, what accountant’s callbook value. It could be more or even less depending on how the negotiation goes.
Shoprite Nigeria business is also its second-largest, based on book value and next only to Angola.
How will it be funded? The potential investors will likely fund this transaction via debt or equity or a combination of both. Deals like this also take time to be completed even if an agreement is announced and will also be approved by the Securities and Exchange Commission of Nigeria and possibly South Africa.
We will keep you updated as we get more information.
Social clubs, recreational centres to reopen August 14
The closure of all spas, bars, lounges, night clubs, cinemas, and game arcades remains in place.
The Lagos State Government has announced that social clubs and recreational centres will be allowed to reopen operations starting from Friday 14 August 2020.
Earlier today, the government released a statement via its official Twitter handle, in which Governor Babajide Sanwo-Olu was quoted to have said that the reopening would be subject to clearance and possession of the Provisional Safety Compliance Certificate. This clearance certification can be gotten right here.
The Governor also added that at the moment, the safety clearance certificates are only being issued to social clubs with registered trustees.
*COVID-19* : Measures announced by the Lagos State Government to further relax the lockdown. @jidesanwoolu @drobafemihamzat #LASG #LagosAgainstCovid19 #CovidLASG #ForAGreaterLagos pic.twitter.com/3Mqz1o9dC7
— The Lagos State Govt (@followlasg) August 3, 2020
In the meantime, however, the closure of all spas, bars, lounges, night clubs, cinemas, and game arcades remains in place. Any of the listed businesses that reopen prior to the set date and without meeting the set guidelines will be shut down. A monitoring and enforcement team will be at work to ensure that the “guidelines and directives are complied with to the letter”.
As part of moves towards a complete easing up of the lockdown, the Lagos State recently announced the reopening of schools. The government also announced that the reopening of religious houses and places of worship would take effect from August 7.
However, this is subject to strict adherence to standard precautions that have been put in place. All schools are expected to provide hand-washing facilities and ensure physical distancing within their premises. The Lagos State government will make available face mask 200 schools to which this reopening exemption applies for the duration of the reopening.
Relevant agencies have been directed to carry out spot checks and random inspections of schools and defaulters will be sanctioned appropriately.
FG announces reopening of 104 unity schools tomorrow
The outcome of the meeting was disclosed in a press statement.
The Minister of State for Education, Emeka Nwajiuba, has announced that all the 104 Unity Colleges are ready to open for exit classes tomorrow, August 4, 2020.
The Minister revealed the preparedness of the Unity Colleges during a Zoom meeting with the Commissioners of Education of the 36 States of the Federation on Monday morning.
The outcome of the meeting was disclosed in a press statement by the Federal Ministry of Education. The statement was signed by the ministry’s Director of Press and Public Relations, Ben Bem Goong.
While announcing the formal opening of exit classes for the unity schools, Nwajiuba expressed his delight at the level of comprehensive preparation that has been put in place by the principals of the Unity Colleges.
During the meeting, the various state commissioners reported varying degrees of preparation and readiness for reopening between August 4 and August 10, 2020, for virtually all schools within their jurisdictions.
The press statement from the ministry says, ‘’Ahead of August 4th, 2020, Minister of State for Education, Hon. Chukwuemeka Nwajiuba has announced that all the 104 Unity Colleges are ready to open their gates to exit classes tomorrow.’’
‘’From today, the Honourable Minister of State for Education, Permanent Secretary and Directors will embark on an assessment tour of all Unity Colleges to ascertain and confirm the reports they have received from the Principals of Unity Colleges.’’
‘’Similarly, Federal Education Quality Assurance Directors deployed to the States have been directed to monitor compliance in their respective states.’’
The Commissioners of Education from the states were asked to embark on assessment tours in their areas of coverage to ascertain the level of preparations for reopening. While most of the schools will be reopening tomorrow, others will continue to fine-tune their preparations in the coming days for reopening.
Emeka Nwajiuba asked all schools to communicate their specific reopening dates to their parents and students in order to avoid chaos in the system. The statement also noted that all returning students are to undergo temperature checks among other protocols before being admitted into their schools.