For the second time, GDP rebasing has exposed real estate as being larger than it was previously thought, which speaks to the immense potential of the sector and the pride of place government ought to accord it as an economic growth enabler.
In the ongoing GDP rebasing exercise by the National Bureau of Statistics (NBS), which has 2019 as the base year for reasons of the year’s relative economic stability, the sector has been listed as the third-largest sub-sector in the economy, up from 5th position.
The first GDP rebasing in 2014, when the base year was changed from 1990 t0 2010, showed that the Nigerian economy was more diversified with a GDP value estimated at $510 billion.
That exercise, which presented Nigeria as the largest economy in Africa, surpassing South Africa, also revealed that there were much more opportunities in real estate and infrastructure investment than previously imagined by investors and analysts.
Read also: Real estate overtakes oil & gas as Nigeria’s third largest sector
This time around, real estate beat analysts’ expectations, displaced oil and gas in their growth trajectory, placing third largest sector after crop production and trade which placed first and second respectively, according to early numbers from the NBS.
Though views are mixed as to why the sector came third largest ahead of traditional growth sectors such as agriculture, telecommunications, oil and gas, real estate sector’s resilience, healthy housing fundamentals, strong demographic factors such as urbanisation and a young, expanding population, were strong support systems and growth enablers cited by those who believe the NBS numbers.
The GDP report released by the bureau in the third quarter of 2024 shows that, against all odds, real estate services grew by 46.52 which was higher by 43.70 percent points than the growth rate reported for the corresponding period in 2023 and lower when compared to the preceding quarter.
On quarter-on-quarter basis, the sector’s growth rate was 16.15 percent. It contributed 5.43 percent to real GDP in Q3 of 2024, though that was lower than the 5.58 percent recorded in the corresponding quarter of 2023.
Besides this, MKO Balogun, CEO, Global PFI, told BusinessDay at the weekend that the feat the sector attained in the rebasing exercise also has to do with the record activities in the housing sector by the public sector which has invested in various housing initiatives.
Frank Okosun, CEO, Knight Frank Nigeria, shares this view, noting that “the minister of housing and urban development is also driving for more financing in the housing budget.” He added that the residential segment of the housing market remains attractive for investors despite rising costs while the market itself remains active even though inflation has led to some value adjustments.
Funso Adebayo, a property consultant and insurance broker, noted that though real estate was impacted like other sectors by the prevailing economic headwinds, it naturally benefits from the activities of other sectors, explaining that every economic activity takes place on land which is an integral part of real estate.
Adebayo recalled that in the 2014 rebasing, activities in the services sector overtook those of agriculture and industry which had positive implications for real estate sector. “This led to increased opportunities in real estate as increased activities in the services sector, including wholesale and retail trade, human health and social services, information and communication as well as professional, scientific and technical services, all needed real estate assets,” he explained.
He noted that, the real estate has experienced tremendous increases in rentals and values across board in the market space, adding that 2024 was a time when construction activities witnessed robust capital outlays not minding the prices of building materials which readjusted heavily and influenced forces of demand and supply.
In most countries of the world, when an economy is experiencing a downturn, real estate usually takes a hit, but Nigeria defied that logic in 2024, according to Gbenga Olaniyan, chairman, Estate Links, who was also quoted as saying that the reason was “partially because most properties are not leveraged and as such, there is no panic of inability to meet mortgage obligations.”
Although he foresees positive trends in the real estate sector in the new year to be largely driven by cost of building materials, confidence in the economy and foreign direct investment (FDI), government regulations and policies, he added, will affect the diaspora market’s mindset such as demolitions, and compulsory acquisitions.
Read also: GDP rebasing: Crop production, trade, real estate now largest contributors to economy
“Confidence in the market was dented in 2024 with the confusion arising from compulsory acquisition for the Lagos-Calabar coastal highway and demolitions in Abuja amongst others. Communication of policies and laws needs to be improved upon,” he advised.
Urbanisation and the growing need for affordable housing have been vital drivers of the real estate market, but the traditional risks which include high inflation rates, rising interest rates, and a volatile exchange rate remain, creating significant obstacles for developers, investors and buyers.
But Akintoye Adeoye, president, Real Estate Developers Association of Nigeria (REDAN), says that in spite of the strong demand for affordable and decent housing, investors experienced mixed results as this happened mostly in urban centres across the country.
Adeoye also has knocks for demolitions of properties in Lagos, particularly in connection with the Lagos-Calabar Coastal Road project, as well as the destruction of other project sites and investments across parts of Lagos and the FCT which, in his view, hindered the growth of the real estate sector.
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