The real estate sector in Nigeria slowed with average performance in 2022 while the economy shrugged daunting and multi-faceted challenges to demonstrate resilience and renew hope, according to a new report.
The report, compiled by Ubosi Eleh + Co, a firm of estate surveyors and valuers, explains that with inflation peaking at 21.09percent and the country preparing for general election in 2023, real estate and other economic activities were adversely affected, noting that the residential segment of the market experienced slower short term transactions despite the enormous interest and incentives it enjoys.
In the commercial segment of the market, the report says that due to the difficulties in that market, developers chose to go for mixed use developments with the hospitality subsector recording significant upturn after being impacted negatively for two years by Covid-19 pandemic.
“One noticeable trend we observed was developers’ emphasis on the development of one and two bedroom flats which are the preferred accommodation for the millennials due to their smaller size and lower budgets,” Chudi Ubosi, the company’s Principal Partner, noted.
Ubosi noted further that rental values for selected rented accommodation-types and commercial real estate across the states of the federation were either the same as in the previous year or had slight increase, pointing out that, in spite of everything, real estate performed better than expected in many instances which was why the expected slump did not happen.
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The report frowns at that the N398.28 billion allocated to the Ministry of Works and Housing from the total budget of N20.71 trillion presented by former President Muhammad Buhari, saying that the allocation was grossly inadequate for a ministry that is overtly capital-intensive.
It notes also that the low allocation implied that, for the 2023 fiscal year, there will be little room for capital projects. It envisages a situation where property developers will have to spend more to provide their own infrastructure, given the poor state of federal roads and the high cost maintaining existing ones which are in disrepair.
The report’s outlook for the sector in 2023 is promising. “Real estate remains an asset class of choice in Nigeria, the various challenges notwithstanding,” it says, predicting that economic activities generally will pick up with the new government doing the needful for the economy.
It observes that Lagos and Abuja have benefitted most in terms of real estate investment despite the high level of insecurity in the country which, it says, will continue. Among other things, the report projects that demand for medium sized retail space for shopping complexes, shopping centres and neigbourhood shops will be positive and also high.
The report expects rental demand to move upwards, by as much as 10 percent, especially for flats, with the demand increasing as the year wears on. It adds that the market will remain slow all through the year with a chance of rebound in 2024, depending on the state of the economy.
