While Nigeria’s property market has been disrupted by the outbreak of coronavirus, the impact of the pandemic, which is expected to crash prices of properties, offers opportunity for real estate investors and potential home buyers.
Gripped by fear of uncertainty caused by the virus, real estate players paused on their decisions to invest and, according to industry analysts, this will fuel glut in the market and lower property prices.
“What will happen is that supply will outstrip demand as the virus outbreak is expected to affect consumer behavior,” Chinua Azubike, MD/CEO, Infracredit, said adding that the demand-supply gap that will be created as a result of the Covid-19 will last for the short to medium term of say 9 months.
The social distancing rule and lockdown in some real estate hubs in the country is another basis for the price increase projections by the industry players.
The rampaging virus has restricted both real estate investors and property developers from property inspections following the stay and work from home orders given by the government to curtail the spread of the virus.
According to Jemil Dawodu, managing director, CBRE Excellerate, the expected glut in the real estate market is one that is inevitable, but it will also present an opportunity Nigerians can tap from.
“Yes, there will be a market correction. Yes, there will be lower prices and that holds opportunity for potential home buyers,” Udo Okonjo, CEO/VC, Fine and Country West Africa said during a recent webinar by Mixta Africa with the title; Making Informed Investment Decisions in the Covid-19 Era.
Okonjo explained that real estate investors who have long term capital or funds that have low-interest rate can leverage the opportunity to tap from the impact Covid-19 will have on the property market.
Meanwhile, the slowdown in economic activities which is expected to reduce consumers’ spending capacity is a constraint that is likely to prevent low-income earners who are supposed to leverage the price crash to become first-time homeowners. Studies have shown that Nigeria’s middle class are currently more concerned about sustainability and the health of their family members.
“Low purchasing power will pose a barrier due to the economic downturn, Tunde Balogun, CEO of Rent Small-Small said.
Before the coronavirus pandemic, access to affordable housing in Nigeria was crippled by the lack of non-functioning mortgage system, high cost of property development made worse by the country’s archaic Land Use Act.
Despite its large-size population and self-acclaimed biggest economy in Africa, Nigeria is crawling behind its peers in terms of homeownership level. Whereas homeownership level is 84 percent in Indonesia, 75 percent in Kenya and 56 percent in South Africa, Nigeria, the largest economy in Africa is crawling behind at 25 percent.
On how the various segments of Nigeria’s real estate industry will be affected by Covid-19, industry stakeholders said that Grade A commercial office space, for instance, will suffer less demand, lower or static rents at renewal.
Chudi Ubosi, an estate surveyor and valuer, said that rents will be paid more and more in Naira, not Dollars. He added that Grade B office space will remain the same; there will be more defaults at renewals while demand will be flat as people and organizations contend with post-COVID issues.
Ubosi said further that hospitality will suffer because there will be fewer travels; fewer parties; fewer socials as people want to avoid crowds. “Travel will only be made when it is unavoidable; the fear of infection in the hotel rooms will also account for less patronage,” he added.
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