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The Nigerian Real Estate Market Post-Covid-19

The beginning of the year was welcomed with discussions about the economy and real estate market outlook by experts in the real estate sector. Many analysts predicted that the real estate market will experience a boom. These predictions were based on assumptions that there will be improvement in the economy. This includes the perceived increase in oil revenue due to projections that the oil sector, which is Nigeria’s major source of revenue is trading above the Federal Government budget benchmark of $57 per barrel as well as plans by NNPC to produce 2.5M barrels per day(bpd) by H1 2020, improvements in GDP growth driven by the agriculture, telecommunications and service sectors among others.
However, we are in a period where the whole World is facing the reality of an unexpected and unprepared for pandemic (COVID-19) which has caused Nations to focus on life sustaining means while general focus is shifted from improvements in the economy. The effect of COVID-19 Pandemic has caused the Nigerian Government to declare a total lockdown in most affected states; Lagos, Abuja and Ogun. Similarly, other states such as Osun, Rivers, Oyo and others restricted inter and intra state movement to flatten the curve of the Pandemic.
This total lock down has affected virtually every sector of the economy negatively; individual earnings, company revenues, and the government were gravely affected during this pandemic. To curtail the impacts of the Pandemic on the nation’s economy and to stabilize the economy, the Federal Government released several relief packages in form of grants, food stimulus, loans, tax waivers, subsidies, etc.
My opinions on the Nigeria real estate market post-COVID-19 are premised on the assumption that COVID-19 Pandemic would end in few months’ time, as well as the glaring impacts that COVID-19 would leave in its wake on lives and businesses.
Residential properties would continue to be in demand as it remains one of the basic human needs. It is expected that rental value of residential properties will be static and remain at current rental value. It is also expected that tenants would seek reduction and instalment payments of rent as there would be need for them to maintain balance in generating income. There will also be pressure on property managers to collect rents from tenants as Landlords expect rent remittance, therefore they must brace up to face this challenge.
On commercial properties, business owners would need to restructure their operations to stabilize their cash flow thus making them to downsize their office sizes as internal positions would be reviewed. Rental values would also remain static and remain at their current rates, tenants who are gravely affected would vacate properties while those who are not gravely affected would continue to meet their obligations.
There will be a decrease of foreign companies’ start-up in Nigeria as there will be the need for them to focus on the development of their companies in home countries.
There will be a decrease in the demand for office spaces as COVID-19 Pandemic has revealed that many business can be run remotely, meetings can be done leveraging on video conferencing applications such as Zoom and Webex Meet, and businesses can generate income through digital technology.
The Retail businesses have also been negatively affected as many experienced low or no patronage since retail business thrives on high return through high patronage and how they efficiently manage their
resources. Any business that is able to overcome this difficult time may be the greatest winner of all.
It is expected that properties used for events, fashion and make-up, fast food, bars and restaurants would recover quickly as people crave outdoor entertainment even during the lockdown.
On international travels, there would be lingering restrictions for a long period of time, even after the pandemic has been eradicated. This indicates that properties used for hospitality and tourism such as tourist centres, hotels, etc. would still feel the impact long after the pandemic, especially when their target clients are not domestic.
It is projected that there would be a decline in the purchase of property as individuals and companies take stock of their positions after the crises.
There will also be an increase in construction cost due to the devaluation of the Naira, since the Nigerian construction industry depends heavily on importation of raw materials and equipment. Financial institutions lending rate would also increase, thereby affecting developers negatively to access debt financing of projects. Therefore, developers will need to strategize on how to fund construction projects, market developed property to bring sales so as to recoup capital on time.
Government’s capital expenditure on construction projects will reduce and therefore, the expected contribution from the construction industry to the GDP will invariably fall as fewer construction projects will be commissioned.
There will be an increase in the demand for lands for the purpose of agricultural production and storage as the pandemic period has revealed the importance of self-sufficiency in food and local production.
Revaluation of assets would be done generally, while new valuation would be based on how quickly the commercial banks are able to bounce back from the cause.
The Pandemic will leave us with a lot of memories even long after a cure has been found. Individuals and businesses will resume their businesses and operations with a sense of new beginning and opportunities.
The Real Estate sector will continue to be a good store of wealth and purchase prices would continue to improve.
Ibukunoluwa Adepoju is a real estate consultant and researcher, he can be contacted for real estate consultancy service via ibukun@joyfieldrealestate.com or through this Phone number: 08139723429

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