Experts optimistic about real estate performance in 2019

Going by the improvement in the nation’s microenvironment and the positive projections for 2019, the real estate sector is expected to ride on the back of these and other strides it ought to make, and put in a better performance in the year 2019.

Though the sector had been generally sluggish in 2018 because of the lull in the nation’s economy, real estate experts are of the opinion that the sector will experience better performance this year because of signs of improvement in the economy and the expected political and economic stability in the country after the general elections in Nigeria in February.

They say because more stable investment in coming into real estate, politicians and those with money looking for viable business ventures to invest in will channel their money into real estate sector thereby causing boom in the sector. The Managing Director and Chief Executive Officer of Propertygate Development & Investment Plc, a real estate development firm, Mr. Adetokunbo Ajayi, said improvement in the nation’s microenvironment being witnessed now is a pointer to the positive future outlook for real estate sector in 2019.

Mr. Ajayi noted, however, that because Nigeria will be going into general elections in February, activities in real estate sector will be quite slow because of uncertainty in the country but the sector is expected to experience boom with economic and political stability after the elections.

According to him, investment in real estate is more stable compared to any other business venture. Politicians and rich people will like to invest in the sector, adding that because of the lull experienced in the sector in the immediate past year, the sector will offer people opportunity to invest in it.

“Also, because of the uncertainty in the capital market, most shareholders will prefer to withdraw their investment in shares to invest in real estate which is more stable than any other investment. With these positive indicators, the sector will perform better in 2019.”

In addition, we expect the Nigerian housing market with its vast potentials, anchored on rising population, growing urbanisation and expanding economy, to present continuous opportunities to players in the sector. For James Garuba, Principal Partner, Garuba & Associate, a firm of estate surveyors and valuers, the sector will experience boom with the return of economic and political stability in the country after the general elections, adding:

“After the elections, it is expected that political and economic activities will return in full force. “Our politicians will begin to look for where to invest in, and real estate sector being a very viable business venture, will be first choice for them. With politicians investment in sector, real estate will be a big bang in the year 2019,” Garuba noted.

The Propertygate boss, however, stressed that the real estate sector is not out of the woods yet; as such enormous traction is required, if the negative results being recorded in the sector are to be reversed, adding that while some sectors did comparatively better in 2018, real estate sector took a hammer.

“The capital-intensive nature of real estate development means the sector will naturally struggle under a hostile lending climate. The interest rate was very high in 2018 with average lending rate hitting 30 per cent per annum at some point, a situation last seen in 1999. The year 2018 witnessed extremely limited mortgage financing for buyers, crippling potential demand, a situation that is yet to record significant improvement.

“The age-long red tape in land administration and planning permits and other structural challenges are still undermining the sector, affecting development take-offs and delivery, and business performance. Quarter 1 2018 report from National Bureau of Statistics reported a declining performance, with real GDP growth for the sector standing at -9.40 per cent, and contribution to GDP for the quarter at 5.63 per cent, a drop compared to 6.34 per cent recorded for the same period in the 1st quarter of 2017.”

Ajayi stated that going forward, it is important to recognise that the vast potentials in housing will remain difficult to unlock until functional mortgage finance system is put in place, insisting that stakeholders daily talk about huge shortage in housing products, while attention is sometimes misplaced on affordability, when the key to unlocking the sub-sector is mortgage.

According to him: “The solution requires great innovation, as the financial system, as currently configured, cannot provide functional mortgage. Furthermore, the need for collaboration among operators in the sector cannot be more urgent than now.

“There should be a deliberate engagement with the governments and other critical stakeholders on a continuous and sustainable basis to address age-long challenges in the areas of critical primary infrastructure, finance, red tape, processes and reviews of planning permits and rules, perfection of title, land administration, and the built environment generally. “At the macro-economic level, operators should be vigilant as there remain concerns that political activities will have a drag on the economy and more pronounced in 2019, judging by historical antecedents.

“As a company, we are aware that the operating environment, including our sub-sector, remains fluid and dynamic. A continuous understanding of the fundamentals shaping the industry, anchored on knowledge and experience is crucial to business continuity. We must show leadership in innovative solutions, sound management, and strong corporate values. We will remain focused and committed to our vision and strategic goals.”

In his contribution, Mr. Peter Folikwe, a Non-Executive Director of the company said: “The real estate industry is capital-intensive. This is impacting on the earnings of the companies in the sector. Propertygate has a focused board and management. That is why its massive investment in the Propertygate Center in the high brow Business District of Lekki promises a huge return on investment, ROI, in the nearest future.”

Credit: Vanguard