• Friday, March 29, 2024
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Political uncertainty drives real estate sector further into recession in 2018

real-estate

Unlike other sectors of the economy, Nigeria real estate plunged further into recession in Q4 2018 fuelled by the political uncertainty from the just concluded presidential election.

After showing sign of rebound for two consecutive quarters through to Q3 2018, Nigeria’s property market turned southward, falling deeper into contraction mode.

The figures released by the National Bureau of Statistics (NBS) shows that in real terms, the sector contracted by 3.85 percent in Q4 (year-on-year), which is 2.07 percent points  better than the -5.92 percent recorded for the fourth quarter of 2017.

But, on quarter-on-quarter comparison, the contraction reported for the review quarter is lower by -1.17 percent points relative to the -2.68 percent for Q3 2018.

This is despite the fact that Nigeria’s Gross Domestic Product (GDP) grew by 2.38percent in real terms (year-on-year) in Q4 2018 showing an increase of 0.27percent points when compared to the fourth quarter of 2017.

Responding to the sector performance, Rotimi Akindipe, MD/CEO of Groveworld Realties Limited, a Lagos-based real estate development company said it is not as a result of the fact that people don’t want  to buy or carry out transactions in the country’s property market but they are holding back because of the election uncertainty.

“People hold back money during a period like this,” Akindipe said. He explained,  however, that “after the election, people’s confidence to spend will increase, and this will rub off on the performance of the real estate sector.”

Meanwhile, there was uncertainty about the outcome of the 2019 presidential election which took place over the weekend.

The unforeseen conclusion of the election which many  said was a battle between the incumbent president, Muhammadu Buhari and the strongest challenger, former vice president, Atiku Abubakar of the opposition People’s Democratic Party (PDP) affected most sectors of the economy and the country’s property market was not to be left out.

This was affirmed by Yemi Stephens, a partner at Estate Links, a Lagos-based real estate firm, as he said election uncertainty was the major factor that influenced the quarter performance of the sector.

“People assumed or presumed that there might be violence during the election and as such some people did not put money into property investment for the time being,” Stephens said.

He added that the reason political activities impact on real estate sector is because “property is a sector that is sensitive to any political activities as it is dependent largely on how the political environment is faring.”

A further analysis of Nigeria’s property industry, which requires more than 17 million housing units to tackle the challenges, showed that it contributed 6.60 percent to real GDP in Q4 2018, higher than the 6.50 percent it recorded in the preceding quarter but lower than the corresponding quarter of 2017. The activity accounted for 6.41 percent of total real GDP in 2018.

Although, the 2018 full year contraction rate of 4.72 percent is worse than the 4.27 percent recorded for 2017 by 0.47 percent points. The Q4 2018 contraction rate represents the 12th consecutive quarter in which the sector has been on negative trajectory mode.

However, the contraction in the review quarter is not as bad as the -9.4 percent reported for the sector in Q1 2018.

 

Endurance Okafor