NCM2020 (30) - Real Estate: The Calm Realities of a Quiet Market

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Wednesday, February 19, 2020 / 06:00 AM / By Proshare Research/ Header Image Credit: EcoGraphics

 

Nigeria's real estate market growth in 2019 was modest. The market was characterized by high vacancy rates and relatively slow construction growth compared to the year 2018.  Nigeria's real estate nominal growth rate rose from a negative figure of -8.38% in Q1 2018 to +1% in Q2 2018, +3.67% in Q3 2018 and +3.78% in Q4 2018. The real estate sector saw strong nominal growth in 2018 as the economy fought back from a recession between 2016 and 2017. The sector, however, witnessed a slowdown in Q1 2019 as growth dropped to +0.48%. Q2 2019 saw the sector grow nominally by +2.09% and by +3.71% in Q3 2019 (see chart...below).

 

Chart...Nigeria's Real Estate Nominal Growth Rate 2018-2019

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Source: MCORE Consultancy

 

By taking inflation into account, the real estate growth rate was less flattering between 2018 and 2019.  The real growth rate in Q1 2018 was -9.4% and improved to -3.88% in Q2 2018 and -2.68% in Q3 2018. In real terms, Q4 saw a set back in real growth for the sector as growth slowed down to -3.85%. The year 2019 showed a slightly different growth pattern from 2018 as Q1 2019 growth was +0.93% (in contrast to 2018's negative -9.4%) and Q2 settled at a growth of -3.84% (similar to the contemporary period of 2018) and Q3 witnessed growth of -2.31% (marginally better than Q3 2018's -2.68%). In other words, in real terms, the real estate sector has undergone rough patches in the last two years (see chart...below).

 

Chart…Nigeria's Real Estate Real Growth Rate 2018-2019

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Source: MCORE Consultancy 

 

Nigeria's contemporary real estate market development has risen and fallen with changes in international oil market prices. Local Real Estate consultancy firm Intel referred to NBS data, which showed that in nominal terms, real estate growth rose from 15.1% in Q1 2013 peaking at +24.4% in Q2 2013 while full-year real GDP growth was +20.49% in 2013. The rise in GDP coincided with the rise in Brent oil prices to US$115 per barrel. Analysts note that as oil prices tumbled mid-2014, real estate growth also fell, sliding from +22.34% in nominal terms in Q1 2014 to +10% in Q2 2014. Real estate full-year growth for 2014 ended the year at +12.5%.

 

The recent external shocks to international oil prices make Nigeria's real estate sector growth rate unpredictable and potentially high risk. A major factor in the sector's outlook would be the growth in GDP in the year, which will mainly be driven by rising or falling average international oil prices in 2020.

 

Do feel free to share your opinions/observations and feedback with us vide content@proshareng.com and/or research@proshareng.com


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