2015 Real Estate Outlook in Nigeria

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Mixed reactions have continued to rail the real sector of the nation’s economy. While some experts predict impressive outlook of the sector in 2015, others say the sector looks bleak. Sylva Emeka-Okereke reports.

Nigeria’s real estate sector in 2015 appears promising. Though, investors expect the sector to grow tremendously, but the sign appears unpredictable, following a lot of economic and political indicators.
Already, naira has been devalued, oil prices are dropping in the international market and all these are signs that the economy looks gloomy in 2015.

Of course, the real sector will feel the backlash of all these signs, as there will be less money in circulation, thus leading to less buying, less building as well as less construction works.

Investors however expect the sector to grow by over 30 per cent in 2015, as considering the fact that private operators are gearing up to develop more corporate estates to fill the yawning housing gaps.

Property prices will drop in some states but majorly, it will be an exciting year for speculators, investors and the property market as a whole.

Some investors had long before now, predicted that, the forthcoming general elections in February 2015 might slightly alter their investment calculations, as there might be change in government, which they noted, would offer savvy investors the opportunity to buy properties at affordable prices to make more gains, based on good buying conditions.

It is predicted that housing issues might top the political agenda of some parties. There is high probability that affordable housing will once again, feature on their political campaigns.

Recently, the Director_General, Bureau for Public Enterprises (BPE), Mr. Benjamin Dikki, said in Lagos, that the Federal Government would kick-off housing reforms in 2015, aimed at making housing affordable to Nigerians.

The BPE DG, also disclosed that the agency is working with the Ministry of Housing to review the legal and regulatory frameworks to shore up housing stocks in the country.

According to Dikki, the housing reform would give private operators the opportunity to invest in the sector and assist government to provide decent and affordable houses to its citizens.

While admitting that Nigeria is having 17 million housing deficit, the BPE boss said, the reform would take care of the housing gaps in the country.

“We are ready to reform the housing sector. We don’t have housing units and the few ones we have are in the hands of few individuals at the top of the echelon in the society. So, we are looking at what government can do in the aspect of the reform, so that private sectors can be empowered as in other countries of the world to provide the housing units”, he stated.

As it is, it is likely that the prices of houses will continue to rise, but at a slower pace than we have seen in the outgoing year, with most experts predicting less than five percent though, there might be considerable variations in some states, depending on land mass as well as locations.

The United Nations Development Programme, UNDP, had recently revealed that with about 17 million housing deficits, the country needs over 5,000 housing units annually in the next 12 years to fill the yawning gap.

It would be recalled that the housing deficit rose from 7 million in 1991 to 12-15 million in 2008 and 17-18 million in 2012 and unless the Gederal Government is able to deliver on its promise to provide one million new housing units yearly, the situation will get worse.

The UNDP has urged Nigerian government to adopt a multi-pronged approach to redress the housing shortages, listing the methods to include involvement of central, regional and local governments in housing projects.

The collaboration, it noted would involve private sector, non-governmental agencies, community associations as well as developing a viable mortgage finance sector to assist the private sector.

Also, the World Bank has warned that the rising population could hit more than 200 million by the year 2050, which would increase rural and urban drift as well as the rising building costs, exerting serious pressure for shelter.

The Ministry of Housing corroborated UNDP statements, when it noted that since the establishment of the Federal Housing Authority (FHA) in 1973, it has been able to deliver only 35,309 housing units nationwide with Lagos metropolis having the highest number of the units. Investigation has shown that the number of housing units in Lagos metropolis rose from 393,000 in 1970s to 700,000 in 1992 and grew further to 1.25 million units in 2012.

It would be noted that since the second phase of the national policy on housing was announced in 1972, under which about 5 million housing units were said to be delivered by the three tiers of government, less than 200,000 have actually been delivered till date.

With the growing population over 160 million, experts said, Nigeria needs more than 17 million new housing units to withstand the test of time, with an estimated costs of over N50 trillion to reverse the trends.

Presently, over 80 per cent of Nigerian adults are said to be living in rented apartments, compared to 19 per cent in South Africa and 22 per cent in Ghana.

Already, there is an urgent need for guest houses in urban area and it has been growing on daily basis. In some Nigerian cities, residential accommodations have disappeared while commercial properties like eateries, banks and telecom offices have taken over the apartments.

Also, some of these cities have developed reputations for excessive night life services like clubs and shopping malls, thus making the prices of the property in those areas, to go up as the demands are hitting the rooftop.

Just as some stakeholders are seeing the incoming 2015 as a year of contrasting halves, they however noted that there might be actually a huge rise in property prices.

They also noted that 2015 will be a year of rapid development of properties, especially estates and blocks of apartments. Plots of land would be bought at the fastest rate, if the Land Use Act is being reviewed by the federal government to give developers easy and comfortable access to develop more housing units in the country.

There is also greater need for security and infrastructure to spur more demands for serviced estates and apartments, where people will feel safe with access to water and light.

They therefore advocated for the housing models of some countries like Singapore, South Africa and United States of America, where private operators were encouraged to build more housing units, using modular technology to achieve it.

To give flip to these models, there will be need to recapitalize the nation’s mortgage banks, which is not only necessary, but very urgent to attract capital funding to support the real estate development.

Overall more homes need to be built to meet demands and in 2015, there would be tremendous steps to access loans by developers and the deals offered could be the key to more successful housing units in the coming year and beyond.

Experts have said, that until the monetary authorities bring down the interest rates to single digits to enable low income earners to obtain affordable mortgage financing, the nation’s mortgage industry will remain at its present dismal level, contributing below one per cent to gross domestic product, compared to 24.7 per cent in Malaysia, 29 per cent in South Africa, and 85 percent in New Zealand, according to the Central Bank of Nigeria, which has laid out plans for a N200bn intervention fund.

The Federal Governments should as a matter of urgency, invest massively in basic infrastructure like roads, electricity and water, whose inadequacy has increased the cost of building.

The state governments should as well, engage private sector to target millions of new housing aimed at developing wellplanned new towns. Collaborative efforts between the government, research institutes and private developers are necessary to promote alternative building materials as against the expensive cement-based block style that often accounts for over 40 per cent of the total costs.

Government should revive its reforms of the mortgage sector to reverse a situation, where over 70 per cent of all housing projects is undertaken by private individuals and informal sector, where mortgage loans account for only 0.5 per cent of all lending, compared to 30-40 per cent in other emerging economies and 60-80 per cent in developed economies.

Source: National Mirror