- November 18, 2022
- Posted by: admin
- Category: Real Estate
Following persisting unfavourable policies and liquidity crisis affecting the economy, the heat on the nation’s real estate is intensifying, especially in the residential market.
Despite increased demand for residential property, there’s still a shortage of available homes, making some properties popular and competitive for interested buyers. As the overall economy struggles, mortgage rates and the cost of funds are still high.
Apart from the construction cost variations on projects that are hurting investors, making them shift completion dates, a significant part of the labour force has raised their costs due to inflation and increasing standard of living.
The factors influencing the market include depreciation of the naira, poor access to state land for mass housing, high cost of building materials, high cost of finance, a larger population of citizens desiring homeownership, shortage of options for low-income earners and lack of conducive environment for investors seeking long-term wealth.
An estate surveyor and valuer, Mr. Sam Eboigbe, said: The listings and corresponding offers of residential real estate transactions and deals in the market place are lately becoming interesting.
“It should be appreciated that apart from the initial setbacks witnessed in the sector during the COVID-19 and immediately after, the market has recovered in selective areas with impressive performance.”
Eboigbe, who was the former chairman, of Nigerian Institutions of Estate Surveyors and Valuers (NIESV) faculty of estate agency and marketing, said what the commercial real estate sector would record as setbacks are, however, regarded as the multiple gains for the residential real estate market. “We have in recent times witnessed offices downsising and offering some units of commercial spaces back to the market.”
According to him, the work-from-home culture introduced into society has positively influenced the high volume of deals in the market.
“We have witnessed tremendous appreciation in the prices of serviced residential blocks of flats in Lekki Phase 1, Victoria Island, mainland post-COVID till the present day on concluded listings.
“It is not unusual to find listings not marched with healthy offers as some developers who desired to take advantage of the market introduced products, which could not compete with the expectation and standard available in the market space. For early closure of deals, you are advised to come up with generous designs and tastefully finished products that will stand out in the market space.”
He said emerging factors capable of influencing the market may not have changed much, except with the unimaginable exchange rate with the naira being exchanged at N850 to a dollar going by the black market.
“Transactions almost consummated with payment expectations are being frustrated as any of the parties to the transaction could be influenced in his decision to go ahead or otherwise, depending on the outcome of the foreign exchange market, which is largely unpredictable in our present inflationary economy.
“Some projects have failed to meet specific timelines of completion due to escalating prices of building materials. The completed projects with a revised cost of construction will ultimately have price adjustments. It should also be stated that in some cases, completed projects are offered in the secondary market as the original subscribers have sold out during the construction period to secondary buyers, ” he said.
Eboigbe noted that prosecuting elections in Nigeria has always been capital insensitive, adding that candidates and sponsors will raise huge funds from the sales of property portfolios. “This would increase the number of listings in residential estate portfolios depicting the existing scenarios,” he said.
For Mr. Demola Adetola, a fellow of the NIESV, the residential real estate, which has rapidly expanded and recorded exponential growth in the last few years, is currently southward. “It has steadily waned due to declining diaspora remittances, decreasing foreign direct investment and weak corporate demands. They have resulted in market contractions as evidenced by huge inventories of vacant to-let properties and a reduced number of able tenants.
Adetola said: “The pandemic negatively affected the real estate sector. It led to a reduction in development and the sales of real estate. Access to funding and the cost of building materials have spiked in the past few months, owing to the difficulty of sourcing for foreign exchange and the devaluation of the naira.
“This is particularly made worse as the construction industry depends entirely on foreign importation for the construction materials. The scarcity of foreign exchange has proven to be a rather difficult task to import building materials from other countries. The implication is that there is a paucity of materials in the country and where available, they are very expensive. As the prices of materials increase, the price of real estate increases too.
“The unprecedented devaluation of the naira in the last quarter has caused damaging inflation, hence making buying properties difficult for the average Nigerian. Currently, the residential real estate sector is facing a cost overrun sales, and are therefore declining.”
However, despite the range of pressing challenges, he believes the residential real estate sector is set to continue expanding in the future, albeit at a slower pace. “This is because there will always be a need for shelter, hence the residential marketing will still continue to thrive,” Adetola said.
A property developer and Managing Director, of Nigeria Integrated Social Housing (NISH) Affordable Housing Limited, Dr. Yemi Adelakun, said the residential real estate market in the upper and medium income bracket is good, given the purchasing power of the off-takers. “Houses are been sold and new ones are being developed. Nigerians in the diaspora are taking advantage of the dollar exchange rate to Naira to invest in properties in Nigeria.
“The current status of the low-income bracket is different. An increase in the price of building materials and a consequential increase in house prices have made affordability more difficult for off-takers. Mortgage eligibility and accessibility is difficult to achieve for low-income earners.”
He pointed out that increasing costs of engineering, procurement and construction, as well as declining purchasing power in the lower income and partly in the medium bracket are factors influencing the decline in overall inventory.
An Excellence in Design for Greater Efficiencies (EDGE) expert, Dr. MKO Balogun, said: “The real estate market is struggling at this time on both ends – increase in the cost of construction and inability of subscribers to finance their acquisition. For more than 36 months real estate had negative growth and contributed almost nothing to Gross Domestic Product (GDP) until the government introduced the dollar collection to encourage remittances.
“Higher prices have dampened the initial enthusiasm about the growth of the market with the increasing delivery of one and two-bedroom units. Inventory is slow but not declining and investment will continue to see residential as a good option,” Balogun added.
Source: The Guardian (7/11/2022)