Nigeria’s Real Estate Market Projected to Turn the Corner in 2018

Chineme Okafor in Abuja
Nigeria is set to host the globally recognised real estate-focused West African Property Investment Summit (WAPI) this week in Lagos, but with experts insisting that its real estate market could finally turn the corner in 2018, after experiencing a downturn occasioned by the country’s economic recession.

According to a statement which organisers of the WAPI sent to THISDAY Sunday in Abuja, investors in the country’s real estate market might have renewed their confidence in the sector to suggest that it would be bullish in the coming year.
It said as the economy continues to improve from its recession, the picture for the country’s occupational and capital markets were looking brighter, and these were parts of the reasons the real estate market could turn the corner in 2018.

Quoting Tom Mundy, the Head of Advisory for sub-Saharan Africa at JLL, a leading professional services firm that specialises in real estate and investment management, and who would be speaking at the event, the statement noted that 2018 would be a year of consolidation and recovery for Nigeria’s real estate sector.

“Nigeria is finally coming out of recession. Of course, there will be the usual lag between economic recovery and market recovery, but real estate, which has suffered from a sharp supply demand imbalance, widening vacancy rates and falling realised rents, looks close to bottoming. Yes, it will take time for confidence to return fully but there is sound cause to be bullish on Nigeria going forward,” said Mundy in the statement.

Mundy, equally noted that there are five key drivers that support the expected path of improvement of the sector.
According to him, there is first an increasing optimism as the economy kicks into gear, and which would be supported by improvements in the external environment and the government’s strengthening of its fiscal position.
“Inflationary pressures are under control and household income outlook is reasonably robust. Add to this the recovery of the oil price and the picture is looking brighter,” he added.

He also noted as part of the drivers, that government policy making efforts were beginning to gain some credibility through coherent plans to support diversification and fiscal consolidation with the backing of external bodies, as well as evidence that the decline i rental rates in Lagos was reaching the bottom of the cycle.

Additionally, Mundy said there was a legislative framework in place for real estate pricing to mitigate the impact of a volatile economy, stating: “This is vital to support greater liquidity.”
“It will allow for a more efficient mediation of capital between the interests of a growing class of savers and alternative asset classes that can provide annuity income, such as real estate,” he explained.

He said for an economy and population the size of Nigeria’s, there was a structural undersupply of investment grade real estate stoc
“This is changing, which will provide increasing opportunities, for both local and international investors,” added Mundy, who stated that JLL’s experience of other heavily pro-cyclical markets with a close tie-in to commodity exports, such as Russia, suggested that in high growth markets, large vacancy rates and volatile rental growth are necessary at the early stage of the real estate cycle.

He equally listed some pipeline projects such as Wings Office Complex, Royal Gardens Mall, Eko Atlantic, Lekki City and Landmark Village, which he said will support the institutionalisation of the market and greater liquidity over a longer term.

He however noted that this was not without challenges, and that the unwinding of quantitative easing (QE) will create uncertainty, in addition to considerable political uncertainty around a potential successor for President Muhammadu Buhari, while the trend of rising public sector indebtedness was a risk across most of Sub-Saharan Africa.