Recent findings have shown that uncertainties in Nigerian economy are squeezing real estate sector as many housing developments have being put on hold.
Investigation showed that most of the top office and commercial developments scheduled for completion in Nigerian cities of Lagos, Abuja and Port Harcourt before the end of the year might not come to fruition due to paucity of funds, anti-graft war and consumers’ low purchasing power.
Survey also revealed high level of occupancy rates in already completed real estate’s offices and commercial projects, especially in Lagos and Abuja.
According to the Principal Partner, Ubosi Eleh and Company, an estate surveying and valuation firm, Mr. Chudi Ubosi, the totality of the environment was not conducive for real estate investments.
He stressed that uncertainty and instability in the economy/ polity have further impacted negatively on real estate businesses/developments.
He pointed out that despite all the positive statistics sent by government and the Central Bank of Nigeria, the economy is still in recession and even contracting.
The unimpressive economic situations, Ubosi said have prompted developers/investors to put their real estate projects on hold.
According to Ubosi, uncertainty and instability in the real estate sector and the general economy were further worsened by the unguarded utterances and intentions of politicians as 2019 elections begin in next five months.
He said: “In an economy like this when businesses are not certain, when business are not expanding, when investors are not coming as expected as we head towards general elections in next five months, on-going projects have to be put on hold.
“This is impacting on developments of real estate.”
Also, analysts from Bismark Rewane-led Financial Derivative Company (FDC) said that lower reduction in private consumption and the Federal Government’s anti-corruption war have squeezed real estate sector’s growth in the last eight months.
According to the analysts, real estate sector has been feeling the pinch of lower private consumption and anti-corruption sweep, leading to delay in activities and growth in the industry.
They pointed out that lag between economic recovery and market recovery would still delay growth in the sector despite certain recovery in some areas.
Corroborating the analysts, Principal Partner, Kola Akomolede and Company, blamed government’s anti-corruption campaign and whistle-blowing policy, which, he said, led to evacuation, locking up and labelling of several properties as proceeds of corruption for high number of vacant properties in Lagos and Abuja.
Also, a report from Northcourt Real Estate, noted that government’s anti-corruption campaign and whistle-blowing policy have created significant paranoia in high-brow locations.
The analysts noted that despite various efforts to rejig the sector, the industry contracted by -3.88 per cent in the second quarter of 2018 compared to -9.4 per cent in the first quarter.
On major trends in the property market, they said there has been slight improvement in vacancy rates in Lagos, noting that Yaba, Surulere and Magodo Phase II have recorded three per cent, four per cent and five per cent improvements respectively in vacancy rates.
This is not the same with major highbrow areas such as Victoria Island, Oniru, Lekki and Ikoyi with 35 per cent, 37 per cent, 39 per cent and 40 per cent rates of vacancy in residential property.
In the residential segment of the property market, the analysts noted that affordability still remained a key issue despite improved design and finishing features.
In the commercial segment, Grade-A office vacancy rates still remain high. Currently, average rent for the new commercial development still oscillated between $600 and $700 per square metre
According to analysts, take-up rate for these properties remained very low with landlords continuing to throw in sweeteners to attract and keep tenants. They stated that tenants and prospective tenants on the other hand would drive very hard bargains and have the upper hand in negotiations for obvious reasons.