Sluggish movement for real estate

Proshare

Tuesday, October 20, 2015 08:53AM / FBN Capital Research    

The continuing macro challenges and uncertain policy direction have led to a slowdown in real estate market activities.

A handful of planned developments were suspended in the first half of this year, and rents have either grown slightly or remain flat.

In Q2 2015 GDP growth in the real estate sector slowed to 3.0%, compared with 4.9% recorded in the corresponding period in 2014.

Despite the slowdown in GDP growth, in Q1 2015 real estate online portals saw an increase of 43% q/q in trade activities. Based on industry sources, 58% of total demand was for apartments.

Generally, the long-term outlook on development for the residential space is positive. With the Nigerian Mortgage Refinance Corporation (NMRC) in place, it is expected that the primary mortgage sector will be revitalised.

This should encourage potential homebuyers. Nigeria’s ratio of outstanding mortgages to GDP is at best a very low single-digit percentage, compared with over 30% in South Africa.

The country’s housing deficit is estimated at 17 million units. In a bid to bridge this gap, with particular focus on mass housing, the Federal Mortgage Bank of Nigeria (FMBN) has announced plans to engage with the Association of Local Government of Nigeria to devise strategies for building houses, depending on the needs, location and environmental issues in each area.



Although the real estate sector was not singled out as a priority at the recently concluded 21st Nigerian Economic Summit in Abuja, there was a lot of emphasis on the need to diversify away from oil.

Real estate has a part to play in this process, not least for its employment impact.

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