Nigeria Property industry sustains low growth, plummeting yields

Despite predictions by experts that property business would pick-up, after the general elections in the country, investigations showed that the sector was still grappling with a combination of extenuating factors with the result that investors are now experiencing lower returns. SYLVA EMEKA-OKEREKE reports.

Early this year, some property experts had predicted high returns on investments. Basing such predictions on possible property boom, after the general elections in the country, the experts assured of high yields, after the elections.

However, the industry prospects appear not too promising as the sector continues to record low yields, five months after the general elections and three months to end this fiscal year.

Some industry analysts had predicted that many investors would rush to create cash through their properties, thus causing lull in the sector.

But beyond this, they also noted that, the sector may witness proliferation of markets, as several properties will be up for grab, thereby crashing the property prices, as much cash would be available for few properties.

A property expert, Mr. Femi Adeyemi, told National Mirror that 2015 would be a year of great opportunity for investors to acquire property at low prices, assuring that operators in the sector would witness large volume of activities with low cash flow.

According to him, except for those who want to acquire and take possession of properties for the future, 2015 is not likely to be a better year, as cash flow will create great impediments.

He however noted that those, who would make tomorrow’s money, may invest in property today as the gains would be immense from 2016, adding that, one area of interest in 2015 would be renovation of properties, which would be up and running.

He said: “Most investors, who would offer their property for sale this year without success will begin to renovate them, as the year will end with improved cash flow from other businesses.

Even those, who did not offer their property for sale in the year, will consider investments in form of renovation for enhanced value in the last quarter of this year” Some experts have said that the sector would be unpredictable, due to the prevailing economic and political indicators and they may be right, adding that at best it may record 30 per cent growth, considering the fact that private operators would embark on more real estate investments, aimed at filling the yawning housing gaps.

Citing devaluation of naira and crash in oil prices as cases in point, the experts said all these signposts the fact, that the nation’s economy looks bleak in 2015, which would directly or indirectly affect other sectors of the nation’s economy, including the real estate.

Based on their projection, the real sector would feel the backlash of these signs, coupled with the possibility of less money being in circulation, leading to low-buying and less-building with less-construction works.

Already, several local and foreign firms had long before now and even presently, showed interest in the nation’s real estate market by promising to build several housing units to shore-up the present housing stocks in the country. Many of them had disclosed that they might kick-off the housing projects before end of this year and if done, the projected 17 million housing deficit in the country, would be reduced to the barest minimum.

For instance, Pinnacle Point Limited, a South African estate firm had last year, promised to inject over N30 billion into the nation’s real estate sector to provide a world-class golf estate in Badagry, Lagos state. The firm, which had built golf estates in 9 African countries, had projected revenue of over $6.6 billion annually, from the projects. Another foreign firm, EREI Africa said it would also build over 18,000 housing units for women journalists in the country on mortgage basis.

The property development group based in Democratic Republic of Congo, also said, it would build 500 housing units in each of the 36 states of the federation, including the Federal Capital Territory, FCT, Abuja, bringing the total number to 18,000. These are among other firms that have signalled their intentions to increase the nation’s housing stocks through mortgage financing. These are in addition to the federal government’s assurance of housing reforms to make the sector effective to be able to provide affordable houses to the teeming Nigerians.

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Some analysts have also predicted that property prices will drop in some states, which would make it more exciting year for speculators as well as investors. They however noted that the change of government might offer savvy investors opportunity to buy properties at affordable prices, resulting to more gains at the expense of the masses. It was also forecasted that housing issues might top the agenda of this present administration, as promises of affordable and decent houses for citizens would once again, feature on their political campaigns and promises.

Presently, there appears to be a slower pace than we had in 2014, though; there are considerable variations in some states, based on land mass and locations. The United Nations Development Programme, UNDP, had noted that Nigeria has about 17 million housing deficits, which heightened speculations that Nigeria needs over 1,500 housing units annually in the next 12 years to be able to fill the yawning gap.

It would be recalled that the housing deficit rose from 7 million in 1991 to 12-15 million in 2008 and 17-18 million in 2012. Experts have noted that, unless federal and state governments intervene, the situation might be worse. To stem the tide, the UNDP had suggested multi-dimensional approaches, involving governments from central to regional and down to local governments in housing projects.

Such collaborations, it also noted would involve private sector, non-governmental agencies, community associations as well as developing a viable mortgage finance sector to assist the private sector. Also, the World Bank had warned that the rising population could hit more than 200 million by 2050, which would increase rural and urban drifts with the rising building costs, exerting serious pressure on shelter. With the growing population over 160 million, experts say, Nigeria needs more than 17 million new housing units to withstand the test of time, with an estimated costs of over N50 trillion to reverse the trends.

In some Nigerian cities, residential accommodations have disappeared while commercial properties like eateries, banks and telecom offices have taken over the apartments. Other stakeholders are seeing 2015 as a year of contrasting halves; even as they noted that there might be a huge rise in property prices.

The year 2015 will be a year of rapid development of properties, especially estates and blocks of apartments, however, experts say all these promises are hollow. They therefore advocated for the housing models of some countries like Singapore, South Africa and United States of America, where private operators were encouraged to build more housing units, using modular technology to achieve it.

To give flip to these models, there will be need to recapitalize the nation’s mortgage banks, which is not only necessary, but very urgent to attract capital funding to support the real estate development. In all, more homes need to be built to meet demands and in 2015, there would be tremendous steps to access loans by developers and the deals offered could be the key to more successful housing units in the coming year and beyond.

Government should revive its reforms of the mortgage sector to reverse a situation, where over 70 per cent of all housing projects is undertaken by private individuals and informal sector, where mortgage loans account for only 0.5 per cent of all lending, compared to 30-40 per cent in other emerging economies and 60-80 per cent in developed economies.

• NationalMirror