Despite being in recession, Nigeria’s real estate sector showed sign of exiting contraction mood in the third quarter of 2018, in what is the second consecutive pointer of a positive trajectory.
Industry experts polled in a BusinessDay survey linked the growth performance reported for the quarter to Nigeria’s economic performance, readjustment in the country’s property market, government and private sector fund injection and the forth coming elections.
At the end of the 9th month of 2018, the real estate sector reported growth of -2.68 percent as against the -3.88 percent growth rate recorded for Q2 and -9.40 percent in Q1 of the same year, figures compiled from the Natinoal Bureau of Statistics (NBS) show.
Olurogba Orimalade, Chairman of the Nigerian Institution of Estate Surveyors and Valuers (NIESV) Lagos State Branch said what is happening in the sector that has impacted its growth rate in Q3 is as a result of the readjustment in the market.
“What has now happened is that a lot of property owners in various sub sectors of the industry have now come up with different solutions, in either renting or selling,” Orimalade told BusinessDay.
He added also that the developers that invested in some of the houses at very high profit margin have now realised that a profit is a profit, “so instead of them keeping their property in the market for a very long time, they now have adjusted their reality. So there is flexibility that is been pushed by market realities.”
Nigeria’s GDP in the third quarter of 2018 grew by 1.81 percent (year-on-year) in real terms in the third quarter of 2018, driven by the non- oil sector.
The growth rate report in the review quarter represents an increase of 0.64 percentage points when compared to the 1.17 percent rate recorded in the third quarter of 2017.
Q3 GDP figures was 0.31 percentage points better than Q2 2018 figures of 1.50 percent. While for the real estate sector, the Q3 figure released by NBS was better than Q2 figures by 1.21 percentage points.
Adeniyi Akinlusi, President of Mortgage Banking Association of Nigeria and Chief Executive of TrustBond Mortgage Bank said Nigeria’s economic growth rubbed off on the real estate sector.
“You will notice that Q3 GDP growth was higher than Q2, this impacted the real estate sector, also coupled with the fund injected by the government and the private sectors into the industry,” Akinlusi told BusinessDay.
The growth rate for Nigeria’s real estate sector in the review quarter was higher from growth recorded in Q3 2017 by 1.44 percentage points. It contributed 6.50 percent to real GDP in Q3 2018, lower than the 6.80percent it recorded in the corresponding quarter of 2017 and 6.83 percent in the preceding quarter.
Also responding to the quarter report, Dolapo Omidire, Founder of Estate Intel, a real estate research firm, said “the performance of this year is better than that of last year.”
Modupe Anjous, MD of Rydal Mews Ltd, a real estate firm, said Nigeria’s economic growth and the forthcoming election are some factors that are responsible for the signs of rebound reported for the sector.
“Also, towards the end of the year, a lot of people have their allowances, bonuses and benefits from their company and so there is usually a lot of transaction reported during the 3rd and 4th quarter in the real estate sector because people get to have funds they want to use for investment or to acquire or rent a property, as one of their target that is achieved for the year,” she explained.
In the review quarter, Nigeria’s real estate industry was also among the least attractive sectors to the country’s commercial banks as it got one of the smallest portions of loan in the 3rd quarter of 2018.
The figures compiled from the state stats showed that Nigeria’s property sector was only able to attract N710.2 billion in the third quarter of 2018 as against the N744.56 billion and N784.2 billion is got in Q2 and Q1 in 2018 respectively.
“The forthcoming election is another factor that impacted on the sector’s growth rate, as politicians are in need of money and as such they are selling properties at reduced rate and those that want to take advantage of that are buying those properties at a lesser rate,” Anjous said.
Nigeria with the highest population in Africa has about 20 million housing deficit and BusinessDay survey has revealed that about 90 percent of house acquisition in the country is funded by individual savings, owing to the funding challenges in the country’s property industry.
This is coupled with the fact that the country has one of the highest mortgage rates in the Africa region, its mortgage to GDP ratio is less that 1 percent, as against 2 percent in Ghana and over 30 percent in the more developed countries.
The growth reported for the sector in the review quarter is the 11th consecutive quarter the property market has remained in recession since the first quarter of 2016, figures available for the sector on the state funded bureau’s website revealed.
On when the sector is likely to exit recession, Anjous said “until after elections, there won’t be significant change because of the political uncertainties.”
Source: Endurance OkaforFollow Us on Social Media