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Real Estate: Looking for Growth Catalysts

Property & Real Estate	3305 VIEWS
Property & Real Estate
3305 VIEWS

Tuesday, March 12, 2019 10:00AM / CSL Stockbrokers

Despite the emergence of the economy from recession in the second quarter of 2017, the real estate sector has been struggling and unable to record a positive growth since 2016 when the economy suffered its worst economic slump in 25 years. Data obtained from the National Bureau of Statistics revealed that the sector has contracted for twelve consecutive quarters. The poor performance in the sector can be attributed to weak disposable income among consumers which has largely affected the demand for housing, elevated interest rate environment which makes mortgage financing unattractive, amidst gaping infrastructural deficit and the failure of government to provide incentives for wide-scale housing supply by the private sector.

The real estate sector which contributed 7.63% to GDP as of 2015 when it recorded a full year growth of 2.11% has seen a reduction in its contribution to GDP to 6.41% as of 2018 while growth has remained negative, shrinking by 4.74% as of 2018. The weak demand for housing has led to a huge number of vacant and abandoned properties/projects particularly in highbrow areas across the country.

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All that said, we believe the real estate sector still holds prospects of becoming an engine of growth for the economy, underpinned by the country’s growing population, an expanding middle-class population, a large housing deficit (estimated at between 17 to 20 million housing units), rapid urbanisation and a young demographic. However, we note that for the sector’s potentials to be fully realized, demand would need to be boosted by improved consumer spending alongside supporting investment policies and a stronger regulatory environment.