Despite the slowing impact of the just shifted general elections and the devaluation of the naira on property demand and supply, the market fundamentals, usually the major drivers of the real estate market are still strong. Nigeria recently devalued its currency by N13.00, exchanging N168.00 for $1 which poses a major challenge for the building sec- tor that is largely import- dependent.
The general elections, now shifted on security fears, remain a major reason for investors trading cautiously and withholding investment. Nigeria has a population of 170 million people, a housing demand-supply gap of 17 million units, and a fast-paced urbanisation growing at an estimated rate of over 50 percent, meaning that over 50 per- cent of the population now lives in the cities and about 40,000 people join the city every year.
“Election or no election, we can still go back to the fundamentals”, said Obi Ejimofo, a property market analyst and the managing director of Lamudi Nigerian online property market place—noting that the country with its huge population and high housing deficit still has to build an estimated 1.8 million houses every year, creating a huge opportunity in the market.
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The size of the opportunity in this market, Doyin Salami affirms, is huge, quoting the World Bank as estimating that 17 mil- lion housing units’ deficit exists in Nigeria and that this deficit is expected to increase to 25 million units by 2020. World Bank, he added, estimated that at 3.5 mil- lion per housing units, the value of the existing opportunity would be about $385 billion, emphasising that “using the mortgage- to-GDP yardstick, com- pared to the BRICS, there was a mortgage funding gap of $58 billion (as at 2011)”.
MKO Balogun, the MD/ CEO of Global Property and Facility International, says the opportunities also derive from global macro- economic environment, explaining that the continued crisis in the Eurozone, slow growth in China, and steady growth of the America economy coupled with the current crisis in the oil market are sources of positive signals to the opportunity available in real estate.
“In the US, housing in- vestment which collapsed as a result of the last financial crisis is picking; in Africa, Nigeria, Ghana and South Africa, infrastructure and commercial real estate investment is in- creasing with more foreign real estate investment companies coming particularly to Nigeria to join existing industry leaders. There is a significant increase in commercial buildings and malls development in the country and it is such that the total number of malls built and commissioned in the last one year is more than the total number built since independence”, Balogun said in an interview with BusinessDay.
His argument is that the naira devaluation sends a positive signal to foreign investors who, with their stronger currency, stand a better chance to take advantage of the existing fundamentals, pointing out that “election is a periodic event and is never a strong factor to deter savvy investors”.
Most analysts believe that the real estate sector would definitely pick up after the election and, according to Ayodele Thomas, MD, Kings Court Realtors, “I see a boost in the rental market, and especially in the middle range housing. Other areas to watch out for are retail and recreational developments. Real estate opportunities will be driven in 2015 by new opportunities in middle income areas, especially around the Lekki-Epe Axis. 2015 is a good year to invest because it is better to get in when prices are bottoming up than when rising”.
