A property auction is a sales event (whether online or offline) where potential buyers place competitive bids on a property.
People use auctions for real estate sales for several reasons.
The most common is that it provides an avenue to sell off assets to buyers with ready cash.
Buyers prefer auctions because they provide access to a wide range of properties that in most cases are below market value. Auctions also make it easier to sell properties that may be difficult to sell through other methods.
Across the world, auctions have helped countries in tackling major housing problems. Although the adoption of auctions is relatively low in emerging economies like Africa, it has the potential to curb major housing issues, especially the housing deficit in a country like Nigeria.
In this article, we provide context to how auctions can be used as a veritable tool for enhancing home ownership in Nigeria. Before we dive in, let’s look at the global property auction market.
Property auctions have become increasingly popular in many countries around the world. The popularity of auctions, especially for real estate transactions, varies across countries. Generally, auctions are more prevalent in countries like Ireland, Australia, and New Zealand. In fact, estimates suggest that auction in New Zealand is around 60% of residential sales. on the other hand, countries like the US and Canada, Nigeria and many other African countries primarily lean towards open market methods when it comes to real estate acquisition methods.
While traditional property sales dominate the African region, the property auction market is gaining traction. More than any other factor, auction offers a faster and potentially more transparent alternative for property sales. In terms of regional adoption, South Africa leads the continent with established auction houses and a longer history of utilizing auctions in selling various property types. Including residential, commercial, and industrial properties.
The auction market has seen increasing popularity, particularly for land sales due to its transparency and efficiency. Accra holds regular auctions by companies like Ghana Auctioneer Company. Compared to other countries mentioned, Nigeria is a still growing auction market. Nigeria’s over 200 million population and 18 million housing deficit presents a huge opportunity.
The growing presence of non-performing mortgage back loans and foreclosures open opportunities for Africa to enhance housing ownership through partnerships. The continent’s rapid urbanization rate has created more demand for properties. These factors for instance have fueled the growth we see in the auction markets in countries like South Africa, and Kenya.
In Nigeria’s fight for affordable housing, property auctions emerge as a potential weapon.
However, success hinges on several factors. Market conditions, fair regulations, and public trust are crucial. While not a magic bullet, if implemented effectively and ethically, property auctions could offer an alternative path to ownership and play a role in tackling Nigeria’s housing affordability challenge.
The challenges hindering the adoption of property auctions in Africa.
Despite its potential, adopting property auctions in Africa, particularly Nigeria faces several hurdles:
Pushing for a more efficient auction market in Nigeria would require a multi-level involvement of the government, private sector, investors, service providers and the people. Everyone has a role to play, starting with the government. The Government, should act as regulators and stick with it
These, of course, must come from a superior party who is acting as a regulator. In our opinion, this should be the sole role of the government-to act as regulators for all auction activities.
These, of course, must come from a superior party who is acting as a regulator. In our opinion, this should be the sole role of the government-to act as regulators for all auction activities.
Private sector – should be allowed free participators in solving what seem to be a social problem
Auction houses, which are mainly private sector institutions, establish the platform for auction transactions to take place. Their role is to ensure transparency and provide expertise in conducting auctions. In addition, the private sector players like financial institutions also act as financiers. They partner with auctions to offer specialized financing options, expanding access to buyers. Real estate players on the other hand, educate the public about auctions, build trust, and guide potential buyers and sellers.
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