Nigeria’s real estate sector growth slowed to its lowest level in two years at -4.57 percent as at March 31, 2020 as coronavirus pandemic caused an early impact on market transactions.
The growth in real Gross Domestic Product (GDP) of the real estate sector, a metric which measures the total monetary value of economic activities in the entire sector was –5.69 percentage points lower than the growth recorded in the first quarter of 2019, and –1.31 percentage points relative to the -3.45 in Q4 2019.
However, the latest data by the National Bureau of Statistics (NBS) shows that the -4.75 percent growth in real estate services in Q1 2020 was 4.6 percentage points better than Q1 2018 contraction of 9.42 percent, the worst growth recorded so far in the sector.
According to Ayo Ibaru, COO/Director, Real Estate Research at Northcourt, the coronavirus pandemic affected Nigeria’s property industry in the first quarter of 2020, most especially in March.
“Real estate transactions were partly on a moderate level and partly declining in Q1 2020,” he explained.
Like other industries in the Nigerian economy, the property sector which is yet to exit the five-quarter recession of 2016 has been disrupted by the outbreak of the deadly virus.
Gripped by the uncertainty created by the coronavirus pandemic, players in the property industry were forced to adopt the wait-and-see position. As a result, many investment decisions were put on hold, pending when there is relief from the outbreak.
“We had a client who wanted to buy a property, and we already finalized everything but due to the virus outbreak and currency uncertainty, he said he would want to wait for the next 90 days to watch the market,” Chidi Etoniru, Managing Partner at Joe Etoniru and Associates, a real estate development company told BusinessDay.
The outbreak of the rampaging virus also restricted both real estate investors and property developers from going ton the field for property inspections as many were observing social distancing amid the 5-week lockdown in cities like Lagos, Abuja and Ogun.
Analysis of the first three months GDP report by NBS revealed that the real estate sector’s contribution to Nigerian economy stood at 5.23 percent as against 5.79 percent recorded in the first quarter of 2019 and 6.45percent accounted in the fourth quarter of 2019.
Meanwhile, before the coronavirus pandemic, access to affordable housing in Nigeria was crippled by lack of non-functioning mortgage system, high cost of property development buoyed by the country’s archaic Land Use Act, among other factors.
Individual efforts at increasing Nigeria’s real estate housing stock by way of developing more houses have not helped to reduce the demand-supply gap or increase the ownership level estimated at 20 million units.
Despite its large-size population, Africa’s largest economy is crawling behind its peers in terms of homeownership level. Whereas homeownership rate is 84 percent in Indonesia, 75 percent in Kenya and 56 percent in South Africa, Nigeria, Africa’s most populous nation has 25 percent.
Industry analysts expect Nigeria’s property market to get some more heat if the virus outbreak is not contained in the next few months as construction and project management are projected to witness some delay due to the difficulty for real estate developers to import building materials.
For potential home buyers and investors, the impact of the pandemic on the property sector may also create opportunity as the projected glut in the market is expected to bring down the value of real estate properties and thus a drop in market price.