‘A lot is going to happen in 2015 that will affect the property market’

It is an election year in Nigeria and the fever is spreading across various sectors of the economy. Property market investors are already slowing investment, waiting to see which direction the market will go after the elections. OMOCHIERE AISAGBONHI, president/CEO, Omais Homes Property Investment and Development Company, in this interview with CHUKA UROKO, speaks on challenges of the property market in an election year, what to expect after the elections, among other issues. Excerpts:

Looking back from January 2014 to date, what is your assessment of the property market?

First and foremost, I would say that the first quarter of the year was promising; everybody was waiting for a couple of things to happen at the national level. And for those of us operating from this part of the country, it was all expectations that things would get better. From the second quarter of the year, it seemed as if it would get better and towards the end of the year, the market started getting dull because of political activities. What happened was that a lot of assets came to the market but there were very few people with cash to buy.

For me, because I do my own construction, it was not easy because the price of cement has not been stable and because most of the things we use are imported, our cost had to go up as the exchange rate of the dollar to the naira went up. We are however, hopeful because the number of houses produced in a year cannot take care of available demand which is still very high. Unfortunately, the price of dollar has gone up and will continue to go up.

This is an election year and a lot of things are being said, generally in the negative. What are your concerns or fears for the property market in this election year?

Even though people say 2015 will be tough, I believe that after the elections, things will stabilise because Nigerians are resilient and will be able to readjust and carry on with life and business. Those who want to do massive investment in the economy are slowing down and watching out how the first quarter of the year will play out. The political class is threatening fire and brimstone, but God has been so kind and merciful to Nigeria and Nigerians and I believe He is not going to abandon us this time around in 2015.

However, realistically speaking from the human point of view, the year looks like one that will be tough because oil price is still falling and has dropped almost 50 percent. A lot of things are going to happen which I think will affect the property market. If not for the rising exchange rate, if I am unable to sell, at least, I will be able to rent, but I have interest to pay my on loan and, because of that, I may not be able to rent even when I can’t sell.

What will your company be doing while the nation goes through this election period, the oil price continues its free fall and the exchange rate continues to go up?

Our decision is that we have to complete all the projects we were not able to complete in 2014 by this first quarter, believing that, by the second quarter of the year when elections are over and a new government is in place, we will look at the market again and see the direction it is going.

The market is so unpredictable that as a businessman, you find it difficult doing projections. At the beginning of 2014, we projected that the dollar would exchange at N160 maximum. But we ended the year at N191 which is about 30 percent increase. Don’t forget that most of the things we use are imported and that makes our case bad. So, if I had projected that what I made from my July sales would be able to finish the project I have now, from what is happening now, it means my projection has failed.

Be that as it may, I still believe that God will help us to apply business wisdom to be able to survive 2015 and I hope that if we survive the first quarter of this year, we will be able to adjust and move on.

We have had financial crisis in this country when we thought the whole economy would crash. Since we were able to survive that crisis, I believe we can survive anything else. But we have to be very careful because if a man falls down twice on a particular road, it is not that the road is too bad but that the man has not learnt how to work on a bad road.

In 2014, there were some activities at various segments of the property market. Some people said demand was quite strong at the middle- and low-income segments of the market while the upper end suffered over-supply. Was that the reality in the market?

Of course, yes. There was high demand in the market. Nigerians want to own homes, but the problem has always been funding. If a young man who is working wants to own a home and he finds a bank that will give him loan facility at 7-8 percent interest rate, he will take the loan and buy a home for himself, but that cannot happen when a bank demands 17-18 percent interest on a mortgage loan. That is almost an impossible loan to take.

We are playing at the middle and upper-middle class market and we are doing well there. But the market that should be booming in this country is the low income market because that is where you have demand and a large number of people who don’t have their own homes.

Unfortunately government has not made deliberate effort to help that segment of the market. If you talk to government about it, they tell you they will give you land, but land alone does not produce houses. We expect government to give other incentives that will enable developers utilise the land. There should be deliberate fiscal policies that will enable the ordinary citizen buy the houses. Government should also give incentives to developers such as tax holiday, reduced approval costs and many more.

I hope we will get a good government in 2015, one that will come up with good policies that will be of benefit to the ordinary Nigerian.

In the build-up to the general elections in February this year, it is expected that some distress sales will be taking place in the market. Have you seen or likely to see something like that?

Distress property sales take place every time elections are approaching. There are many distress sales around town, but they are closed transactions. When politicians run out of cash, they usually sell their property at reduced cost to people who have ready cash. This transaction usually involves high class people and generally, it is the buyer who determines what the price will be.

That happened between September and December last year, when politicians were doing their primary elections. We still expect more this January during the campaign for the election proper. Some of these properties are sold up to 50 percent below their market value. The falling oil prices will make situations worse because those operating at the state and federal levels may not be getting the kind of benefits they were used to. So, to win, they have to look for money anywhere.

It must be said, however, that the market still holds out hope because, with 170 million people, we cannot get it wrong especially if the infrastructure and good fiscal policies are there to stimulate supply. Every person needs a roof over his head. Again, if we get it right, the housing industry has the capacity to employ as many people as oil and telecom industries put together.

Some market analysts say that whereas the middle- and low-income markets in Lagos are active with rising demand, the Ikoyi market is struggling with high vacancy rate. How true is this?

Obviuosly, there are many vacant houses in Ikoyi. But most of these houses are not for sale but letting and leasing. A major reason for this is that our people at a point became very greedy. Some of them started asking for $150,000 per annum for a three-bedroom apartment. So, immediately the Ikoyi-Lekki link bridge was done, many people realised that in Lekki, you could get a similar unit at half the price and that worsened the case for Ikoyi flats which already had its challenges.

This is part of the many things that have happened in the property market in the past three to four years that are giving power back to the consumer. If you have money, you determine what you want to pay unlike in the past when the seller dictated the price. Now, there are many products in the market and so it is the buyer’s market. In Ikoyi, it is the tenant that determines what rent he wants to pay.

Generally, what shall we looking out for in the economy after the elections?

After the election, there will be a lot of cash squeeze that will affect everybody, including the government. There is already some kind of austerity measure that government has pronounced and so, the corporate individuals will also have to apply the same measure because there won’t be money to throw about. Oil companies will have to make arrangements for supplementary revenues or they have to suffer cash squeeze.

 

CHUKA UROKO