After a very challenging 2015 which impacted significantly on every sector of the economy, especially real estate, investors, developers and sundry operators have entered the new year looking forward to not just a rebound but also a return to profitability in the market.
Of the various segments of the real estate market, the residential aspect, unlike the commercial, had more than a fair share of bashing, particularly at the high end, where the interplay of low demand, oversupply and unrealistic pricing occasioned a vacancy rate estimated at 20 percent by the last quarter of 2015.
The fall in oil price, the devaluation of the naira and some restrictive monetary policies of the Federal Government, through the Central Bank, conspired to weaken the property market, as many oil workers who constituted over 70 percent of occupiers of high end properties, either lost their jobs to the oil price slump or, or the expatriates had to return to their home countries, leaving behind empty apartments.
Close property watchers are of the view that this segment of the market will see a rebound in the new year, depending however, on the expectation that the new government in the country will lay emphasis on the completion of infrastructure projects, critical to the development of trade and investment via public private partnerships.
They add that the rebound would also happen, based on the expectation that there will be improvement in housing infrastructure development by the engendering of reduced building materials prices, promoting liquidity to the housing and mortgage sub- sector.
Tayo Odunsi, Director, Real Estate Advisory, Northcourt Real Estate, Lagos, in a recent sector report, observed that with increasing inflation and some countrywide felt pinches of austerity, prices of building materials have either stayed constant, or even reduced.
Odunsi adds that this is not unrelated to the significantly reduced demand for these wares, as a result of reduced activity in the sector, pointing out that in September 2015, Dangote Cement was first to significantly reduce the price of cement – the major ingredient of building projects, and subsequently a few other similar reductions followed.
He is of the view that “where expectations from the government are implemented in the new year, the residential market will be quick to rebound; rekindled demand will boost completion of abandoned projects and commencement of portfolio developments. Rents will once again be competitive and investors will once again enjoy upfront annual returns”.
Activity in the Nigerian Mortgage Refinance Company (NMRC) is expected to increase and begin to have the desired impact – creating liquidity for lenders and assisting homebuyers access debt to buy homes.
Odunsi however reasons that should the macro-economy maintain status quo, residential markets would grow increasingly bearish to levels unseen in more than a decade.
Meanwhile, activity in the construction industry ended 2015 on a negative note, with well over 10,000 jobs lost, 6,525 kilometres of road projects abandoned and 54,000 projects stalled.
“As at May 2015, many contractors had stopped work because of payment shortfalls, and many fathers and wives employed by them have been laid off as a result”, Babatunde Fashola, Minister, Power, Works and Housing, disclosed at his maiden media briefing in Abuja.
Fashola explained that some of the numbers from only four companies that were sampled suggest that at least 5,150 workers had been laid off as at March 11, 2015, “and if we realise that there are at least 200 contracts pending, on the basis of one company per contract. If each contractor has only 100 employees at each of the 200 contract sites, it means at least that 20,000 people who lost their jobs can return to work if the right budget is put in place and funded for contractors to get paid”.
Solomon Ogunbusola, President, Federation of Construction Industries (FOCI) notes that construction companies, small and large, experienced significant slowdown in activity last year, further disclosing that heavy indebtedness to the industry estimated at N600 billion, affected the capacity of the operators.
CHUKA UROKO
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