Latest Housing News

Why real estate is fundamental to growing economy

Lagos, Nigeria in the next 48 hours, be hosting the ‘West Africa Property Investment summit (WAPISummit) Which is, easily, the region’s leading property investment conference. This is the summit’s second consecutive year in Lagos after its long sojourn in Accra, Ghana. Ahead of-the conference, which win be featuring more than 90 speakers and 500 delegates from over 200 companies, economists are offering insights on real estate and the economy; insisting that reforming the real estate sector is key to propelling economic growth end alleviating poverty in Nigeria.

Andrew Nevin, Partner and Chief Economist for PwC, is a respected regional and global authority on Nigeria and West Africa. Nevin will be making a presentation at WAPI on the topic, `The Global View On Geopolitics, Oil & Macro-Economics: How are these impacting investment in West African Real Estate?’ Asides his thematic commitment to this topic, Nevin will also be providing answers to a number of real estate-retalted questions, especially on wily this sector is fundamental to growing an economy.

Apparently, the Nigerian government is in denial of the fundamental role real estate can play in growing the economy and that is why, in the hoax called economic diversification programme of government, real estate is not considered a possible growth sector.

Click here to watch weekly episodes of our Housing Development Programme on AIT

But Nevin reasons differently. “Real estate makes up 60 percent of the world’s global assets and in developed countries, real estate buttresses the financial sector, enabling for the creation of asset-backed loans and securities’: he explains, contending that Nigeria’s real estate system cannot work without a proper land registry while banks can-not lend against a property without evidence of ownership.

“The current land titling system is onerous and excludes many people from formal ownership. Based on these facts„ real estate is one of the most critical sectors that, if reformed, will propel growth and alleviate poverty in Nigeria he posited in a release obtained by Business Day.

WHY YOU SHOULD BE PART OF THE 13TH ABUJA INTERNATIONAL HOUSING SHOW IN JULY 2019

Global volatility, as exemplified Trump, China and Turkey factors, are in a way impacting the local economy and, by extension, the real estate market. Foreign exchange and inflation have stabilized in Nigeria amid emerging market pressures, but crude reliance continues to leave the country vulnerable to external shocks, creating persistent uncertainty for investors in the country and affecting all sectors in the economy, including real estate.

Nevin noted that in urban areas, commercial real estate occupancy has declined as a result of low demand in an underperforming economy. Consequently, office rent has declined by 20 percent over the last 3 years in the high-end market while co-working spaces are becoming more popular, consistent with the growing number of tech start-ups and entrepreneurs

“In the premium residential market, demand has shifted to less expensive semi-detached houses and apartments. There is also persistently huge demand for affordable housing ur Nigeria’; he added, forecasting that “Nigeria’s population is set to exceed 250 million people by 2030 ( roughly 50 million households), and by 2025, our housing deficit will be approximately 20 million. We are not building enough houses for people to live in”

It is common knowledge that global of less transactions and low invest-volatility has increased oil price, which has increased oil price, which has benefitted the immediate public sector coffers, but according to Nevin, this is not a good thing as it has been argued that a lower oil price will drive economic reform but won’t $70 – $80 oil keep reform at bay.

Unarguably, the Nigerian economy is benefitting from rising oil prices which is good, because the country requires capital investment to invest in critical sectors and fund long-term structural changes. Over the last three years, Nigerians have seen government debt grow from 12 percent of GDP in 2015 to 20 percent in 2017. A further indication of high demand for government revenue is the voluntary Asset and Income Declaration Scheme (VAIDS), which was implemented to grow tax revenue.

Failure to diversify the economy is a result of bad policies and poor implementation of good policies and poor implementation of good policies. Oil prices have fluctuated since the first quarter of 2016 (over 2 years ago) and the country still has not achieved a diversified economy. There is no reason to believe that persistently low prices in the future will make this happen.

Significantly, though in a negative way, macro-developed factors have impacted the real estate sector in terms of less transactions and low investment. The sector has not seen positive growth since the start of recession in 2016. It has continued to lag behind overall growth, recording a growth rate of -3.88 percent in the second quarter 2018.This is, however an improvement from the -9.4 percent growth of the preceding quarter.

Tight monetary environment, reflected in high interest rates and currency restrictions, are huge contributors to the slow growth in the real estate sector. Heavy government borrowing has croweded out the private sector, making it difficult for investors to finance the capital-intensive projects to the real estate sector. This issue reinforces the need for the government to undertake structural reforms that will improve capital stock and business environment.

For real estate and other sectors the economy, 2019 elections raise major for concerns. The elections will revolve around the economy. There is growing frustration over slow growth, high unemployment, low liquidity and poor infrastructure. Foreign who have low confidence in the economy are also keeping close watch. Thus the election outcome will have some effect on Nigeria’s economic health in the short run.

 

Source: Chuka Uroko

Follow Us on Social Media
Previous ArticleNext Article

Leave a Reply

Your email address will not be published. Required fields are marked *

Translate »

You have successfully subscribed to our newsletter

There was an error while trying to send your request. Please try again.

Housing News will use the information you provide on this form to be in touch with you and to provide updates and marketing.