Though the economic recovery in Nigeria remains slow and fragile, real estate investors and developers in the country, who had been relatively quiet in the last 24 months, have started showing confidence in the economy by kicking off new projects across major city centres.
The investors who play in the residential, commercial and hospitality segments of the property market look set to validate analyst’s prediction of a positive outlook for the sector this 2018. They are really optimistic and confident.
Based on the improvement in the macro-economy and the positive projections for 2018, Adetokunbo Ajayi, CEO, Propertygate Development & Investment Plc, sees hope for real estate, hinging his optimism also on the post-recession positive performance of the economy and growth forecasts.
“The International Monetary Fund (IMF) predicts a GDP growth of 2.1percent for the country in 2018; and the economy is already living up to that forecast, as it recorded a growth of 1.9 percent in Q1 2018. Other economic forecasts, global and regional, are positive”, Ajayi posited
Another source of optimism for the sector also derives from IMF’s projections which anticipate global economy to grow 3.9 percent in 2018; growth of 4.9 percent for emerging and developing economies, with expectation of a rise to 5.1 percent in 2019; and 3.4 percent growth for Sub-Sahara Africa.
But the real estate sector has, in the last 24 months, grappled with sharp supply demand imbalance, widening vacancy rates and falling rents, high cost of building materials, rent arrears and reduced take-up of new office and retail spaces. The sector has not performed well in the last nine quarters.
A quarter one 2018 report by the Nigerian Bureau of Statistics shows that the sector plunged deeper into recession in this quarter. A breakdown of the report shows that the sector contracted by -9.40 percent in Q1 2018 from -5.92 percent in Q4 2017 and -4.12 percent in Q3 2017. This contraction is -6.3 percentage points worse than the -3.10 percent reported in the comparable period of 2017.
This, estate intel says, means that the real estate service sector is the worst performing economic subsector in over two years, after a few sub-sectors that include manufacturing, post and courier services, motor vehicle and assembly.
However, a shift from this trend looks imminent. Developers and investors like Ajayi, have expressed confidence in the economy by commencing a handful of residential projects.
A recent report by the African Property Investment (API) Events predicts increased demand for investment opportunities, especially in the real estate sector in the continent, given the macroeconomic indicators released by IMF which points to a surge in real Gross Domestic Product (GDP) growth of five percent across 18 economies in subSaharan Africa.
Damola Akindolire, Executive Director, Real Estate at Alpha Mead Group, agrees to this, explaining that in Nigeria, the demand for land in developing areas such as Lekki in Lagos is gradually scaling up. He noted that this has led to an upward swing of about 10 percent-15 percent in land prices in some choice locations.
Akindolire added that activity in the hospitality sector is also gaining momentum with investors showing positive signs towards investing in hotel apartments, especially with the opening of Golden Tulip in Oniru and Radisson Blu, both in Ikeja.
“We will continue to see a strong run in this space with delivery of additional 1,000 rooms in 2018”, he assured.
BusinessDay, in a recent report, revealed that the Ogun State Investment Corporation (OPIC) was making vigorous effort to create a housing hub along the Lagos – Ibadan Expressway.
The new housing hub is aimed at assisting the state government to create a mega city footprint by providing housing units in the massive New Makun City housing project at the Shagamu interchange and the MTR Garden Estates at Isheri end of the expressway.
In a similar scenario, the Rivers State government has sealed a partnership deal with private real estate developers to deliver about 3,000 housing units in the next few years under the Port Harcourt mega city initiative.
In Lagos, the state government has commenced negotiation with relevant stakeholders for the redevelopment of Adeniji Adele Phase I – V in the city’s central business district. The project is expected to see the transformation of the current estate into high rise buildings of different house types.
An Abuja based property developer, reputed for developing 3,500 housing units in Life Camp, Abuja, and has shown interest in veering into the Lagos real estate market. Sources say the firm is partnering with the Lagos State government to develop 618 housing units at the Jubilee Estate in Iganmu area.
Real estate analysts say the increasing number of projects echoes investors’ confidence in the economy which, expectedly, could serve as the ‘kick’ as activities gradually peak in West Africa’s most vibrant property market.