Nigeria’s property market appears to have defiled all known predictions. Prior to 2016, experts in the industry had predicted that the year would afford investors the opportunity to acquire property at low prices. It was further predicted that with the emergence of a new administration, the industry would witness large volume of activities, even as experts predicted high returns on investments in this fiscal year. But contrary to the predictions, the industry appears to be witnessing low returns on investments as the sector is in serious lull. Already, the nation’s real estate market is dwindling, almost ten months, after the inauguration of this administration. Experts said that the sector might witness proliferation of markets as several properties would be up for grab, thus making prices of properties to crash, as much cash would be available for few properties. Ironically, investors said there is no money to buy property, complaining of low cash flow. According to a property investor, Mr Funso Olufemi, “Apart from those, who may acquire properties for the near future, this year may not be better year, as there is serious cash squeeze in the market’’. According to him, those investing in the market should wait for some time to see how foreign exchange market would impact on the sector, saying, as it stands now, there is no immediate hope for the investors. However, he said, the gains might come in the nearest future, when the issue of foreign exchange would be sorted out by government. Olufemi said investors are not keen to invest in the market due to the dwindling economy, just as he noted that sellers are not even bringing their property to the market, as they are yet to ascertain the economic direction of this present government. Though, investors had expected the sector to improve this fiscal year giving the level of expectations, however some had noted that the sector would be unpredictable, due to the prevailing economic and political indicators. Citing devaluation of naira, crash in oil prices and foreign exchange market, as cases in point, Olufemi said, all these signposts the fact that the nation’s economy looks bleak, which is trickling down to other sectors of the nation’s economy, including the real estate.
According to some experts, the nation’s real sector is witnessing the backlash of these signs, coupled with less money in circulation, leading to low-buying and less-building with lessconstruction works. Investors had earlier expected a growth of about 30 percent within a space of one year, considering the fact that private operators would be encouraged to embark on more real estate investments, aimed at filling the yawning housing gaps, but this appears to be a ruse. Local and foreign firms had long shown interests in the nation’s real estate market, promising to build several housing units to shore-up the present housing stocks in the country. Some even promised to kick-off the housing projects before the end of last year, however, investigation on why they are yet to kick-off the housing scheme, indicated that the present economic indicator is not favourable to embark on such huge projects. For instance, Pinnacle Point Limited, a South African estate company had promised to inject over N30 billion into the nation’s real estate sector to provide world-class golf estate in Badagry, Lagos state. The firm, which had built golf estates in nine African countries, had projected a revenue base of over $6.6 billion annually from such projects. A source from the company, who pleaded anonymity, gave the present economic reality as reasons behind their effective take-off. He listed the exchange rate, lack of economic direction as well as non-clear cut vision in the nation’s real estate sector as reasons behind the lacklustre activities in the sector. Also, a foreign firm, EREI Africa had also noted that it would build over 18,000 housing units for women journalists on mortgage basis in the country. EREI, a property development firm based in Democratic Republic of Congo, had also disclosed that it would build 500 housing units in each of the 36 states of the federation, including the Federal Capital Territory, FCT, Abuja, bringing the total number to 18,000 housing units. These, are among other firms that have signalled their intentions to increase the nation’s housing stocks through mortgage financing. But today, the situation appears tragic as they could not source for dollars to kick-start their projects as promised. It would be noted that the present administration had promised to review the regulatory frameworks to shoreup the nation’s housing stocks, promising to give private operators the opportunity to invest in the sector, to be able to assist government fulfil its promise of providing decent and affordable houses to the citizenry.
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“We are ready to reform the housing sector. We don’t have more housing units, so, we are looking at what government can do in this regard so that private sectors can be empowered to build housing units, as it is done in other countries of the world”, the Federal Government had noted.. While some analysts said, there would be a lull in the sector as noticed in 2014, others said, there might be considerable variations in some states, depending on land mass and locations. The United Nations Development Programme, UNDP, had revealed that for Nigeria to close the gap in its housing deficit, the country needs over 1,500 housing units annually in the next 12 years. It would be recalled that the housing deficit rose from 7 million in 1991 to 12- 15 million in 2008 and 17-18 million in 2012. Even as experts have noted that, unless federal and state governments intervene, the situation might be worse. But to stem the tide, the UNDP suggested a multi-dimensional approach, involving governments from central to regional and down to local governments embarking in housing projects.
It, however, noted that such collaboration, would involve private sector, nongovernmental agencies, community associations as well as developing viable mortgage finance sector to assist the private sector. Similarly, the World Bank has warned that the rising population could hit more than 200 million by 2050, which would increase rural and urban drifts with rising building costs, thus exerting serious pressure on shelter. With the growing population estimation of 170 million, experts said, Nigeria needs more than 17 million new housing units to withstand the test of time with an estimated cost of over N50 trillion to reverse the trends. In some Nigerian cities, residential accommodations have disappeared while commercial properties like eateries, banks and telecom offices have taken over some apartments. Other stakeholders are also seeing 2016 as a year of contrasting halves; even as they noted that there might be a huge rise in property prices from 2017. They however advocated for housing models of some countries like Singapore, South Africa and United States of America, where private operators were encouraged to build more housing units, using modular technology to achieve it.
To give flip to the model, experts have advocated for the recapitalization of the nation’s mortgage banks, which are not only necessary, but very urgent to attract capital funding to support the real estate development. In all, more homes need to be built, as government should take urgent steps to ensure favourable economic policies, capable of ensuring access to loans by developers. Experts also noted that the reason why the property market slowed down since 2015 was due to cautious attitude by major investors, who have pulled back with keen eye on possible outcome of government housing policies. This is as the market is also responding to security situation in the country. Close watchers of the market said the situation was also discouraging local and foreign direct investments. Investment expert, John Odeh said: “Last year was very promising, as everybody was hoping for a return on investments, but what is happening now, is a source of concern for many Nigerians, particularly property investors.” According to him, investors are no longer interested in buying property due to uncertainties, caused by stiff monetary policy of this present administration, a situation which he said, has pushed the nation’s real estate market into uncertainty. He however revealed that since this fiscal year, investors have stepped in slowly, even as some home owners are off-loading distressed properties. ‘’While some investors are not buying properties, the savvy ones are scouting for distressed properties to buy with the intention to re-furbish and resell at a later date.
This is not a new game for investors in the market, though the volume of institutional investments appears to be a new strategy’’, he added. Estate practitioners, who spoke to National Mirror, said the transactions in the last five years had disappeared of late, saying the ultimate buyer does not even show up to inspect the property. With banks exercising caution, there is little on the market at a time when first-time buyers and real-estate speculators are anxious to tap both cheap prices and low-interest mortgages. Inventory shortages have spurred new developments despite a glut of properties stuck in some areas and the people affected most are the middle class. Until the last housing boom, there was no much cash squeeze as this, some housing experts noted, stressing that Ambode the tight market is pushing up values and making it harder for buyers to find homes to purchase due to paucity of funds. The Chief Executive Officer of Afriland Properties, Uzo Oshogwe said though, the situation might not be rosy, however, real estate professionals as well as investors are optimistic. She said in the midst of the downturn, the industry is still boasting of 10 percent annual growth with a market value of N6.5 trillion in 2015, even as she anticipated $13.6 billion investment profile in 2016. ‘’In any economic downturn, there is an opportunity.
The opportunity here lies in the ability to revolutionize and persevere’’, she stated She said the biggest opportunities lie in Lagos, Abuja and Port Harcourt, being Nigeria’s commercial, administrative and petroleum industry capitals. Oshogwe also identified real estate and Information and Communications Technology, ICT, as some of the fastest growing sectors in the nation’s economy with a lot of opportunities. The growing population remains a driving force in both sectors. Nigeria’s middle class is growing by 7.9 percent per annum and these are the people with purchasing power to pay for rent, purchase houses and invest in ICT. Rapidly growing urban population, Lagos state grows at roughly 3.2% per annum, Abuja grows by 4.3 percent per annum, and Kano grows at 3.3 percent per annum. All these imply demand for houses would continue to rise. Property development, she said, is arguably the most lucrative of all investment opportunities in Nigeria’s real sector.
