January 10, 2012
*As analysts see brighter prospects in 2012
The out-gone year 2011 was not particularly exciting for property developers and investors, as the market ended the year with subdued demand and slow development.
This is despite the fact that the market witnessed a remarkable improvement in 2011, over 2010, analysts have said.
The analysts estimate that not more than 20 percent of the many enquiries and transactions initiated, ended up in sealed deals, stressing that effective demand was summarily on holiday.
They add that at public and private sector levels, policies and projects were initiated but could not be carried through, for a number of reasons bordering on credit and unsupportive business environment challenges.
“It was really a challenging year and for many of us, it was a mixed grill of experiences. The market was vibrant to the extent that there was a seller and a buyer at any point in time, but the challenge was the quantum of transactions closed”, Chike Muoguilim said.
Muoguilim, who spoke in an interview with our correspondent, reasoned that if there were 100 housing units for sale with only 20 buyers, “it means there is a mismatch; it means also that price will drop because supply has outstripped demand; people were always making enquiries but only a few were consummated”.
Chudi Ubosi, an estate surveyor and valuer agrees, maintaining that unlike 2010 when people were not even talking about renting houses or moving into new offices and shops, there were enquiries in 2011, “but on the whole, effective demand was lacking.”
According to Muoguilim, there were a lot of properties, particularly at the high end market, but sellers were asking for prices that were ridiculous and out of tune with reality.
“Somebody may have bought a property for N10 million five years ago; the real value of the property today is about N5 million, but the seller has it in his head that the value of the property remains N10 million. Most sellers really find it difficult to accept the market and this is why you have properties introduced into the market in January still there in December”, he explained.
Ubosi explained that lack of credit facilities was the bane of the market within the period under review. Muoguilim shares this view and, according to them, this problem compelled major users of real estate to review accommodation strategies for their staff.
This, they added, also explains why the rental market was visibly more vibrant than the sales market.
“The major users of real estate have now redesigned their strategies. Companies like Shell, Total etc are now going into special agreement with their staff to take money and rent their own houses by themselves—something like the federal government’s monetisation policy, and a lot of the vacant properties in Ikoyi are victims of this new arrangement”, Muoguilim stated.
Bode Adediji, who expressed concern over dashed hopes in 2011, noted that the real estate sector and the property market in general, were in downward trend, exhibiting what he described as “verifiable chronic recession” in virtually all locations in Nigeria.
“All told, demand was on downward slope while supply, in a technical sense, continued to move up. This explains why the market has seen considerable price slash of close to 50 percent; 30 percent and 10 percent depending on location”, he said.
Adediji argued however, that even if all the resources were available in the economy, the issue of confidence of the investor was important to awaken transactions and players in the sector, explaining that “Once there is serious environment of insecurity, the first to be affected and the last to recover is the property sector, because under a state of insecurity, people can still go into the business of importing on a short term basis, but that cannot be done in real estate with its long gestation period. Where people don’t have any hope or source of income, they won’t like to participate in real estate investment and that exactly was the experience in the market in 2011”.
Ubosi noted that there weren’t many landmark developments except for UPDC’s 15-floor Victoria Mall in Victoria Island, the $100 million Ikeja City Mall; Afribank Estates Fair Trade in Abuja, Churchgate Tower also in Victoria Island and a few high rise residential buildings by Ibalex Construction in Ikoyi.
Some building projects like IHL Properties’ Platinum Rows in Lekki, Lagos and Capital Alliance Properties’ Emotan Protea Hotel Select in Benin City, that were expected in the market in September and October respectively could not be delivered.