Lekki Phase 1 estate
Unless the government deliberately sets about injecting money into housing development and other construction activities to boost the economy, 2013 construction landscape will be as dull as that of 2012. Nigeria’s construction sector has almost ground to a halt along with its real estate market that is suffering an unprecedented glut. As much as experts want to be optimistic about the market’s prospects this year, most still believe that an economic recovery is required for buoyancy to return to the property market, writes BENNETT OGHIFO
Players in the nation’s construction and housing sector are simply treading water to keep afloat. The situation is so frustrating that everyone is awe-struck, and has taken the wind out of the sail of real estate brokers who find themselves in a binder over the economic downturn. The property market closed last year with sector operators hoping there would be some slight improvement in the market at the dawn of the New Year. Instead, the supply of unsold homes has increased since last year and real estate practitioners say most of the enquiries they receive come from first-time buyers, who hardly return.
Nationwide, there are no signs of progress in real estate and hardly any sales in all strata of the market since many would-be buyers simply cannot get financing from banks that are trying to recover debts owed them and are less interested in traditional transactions with individuals and investors. Prior to the global economic downturn, the nation’s real estate market was in full flight with some sections recording single property prices of well over N4 billion in Ikoyi, Lagos.
But all that is in the past as prices have crashed to an all-time low, yet buyers are nowhere in sight. The credit crunch has had a profound effect on all the segments of the market and the situation has not been helped by growing unemployment that has affected the low and middle end and those who would normally buy at the luxury end of the market just seemed to disappear since the Central Bank of Nigeria began its restructuring of banks.
Real estate practitioners have expressed grave concern that the lull has great potential of putting most of them out of business. “We are practically not doing much these days,” said a realtor, Omolade Kola. Enquiries made, he explained are few and far apart, adding that most estate firms now send all their staff out into the field to hunt for potential buyers. The bleakness of the market has created a nightmare for people whose livelihood is dependent on home sales.
“Things are presently at a bad stage and we pray they don’t worsen in the course of the year,” says Brown Omotayo, an estate agent in Yaba, Lagos . The market’s downturn, he explained, affects both big and small estate practitioners because it is a huge market that is serviced mainly by leg-work for now because “we still have not reached the point of deploying technology to do the job. So, if it is bad for the big players then the small ones also feel the pinch. The economy will have to get better for the property market to improve.”
But according to a former banker, Justus Okoroafor, there are no clear positive signs that the economy would recover soon, “certainly not with the promise of further consolidation of banks, apathy towards the stock market, lack of mortgage loans and declining incomes of workers made to accept pay cuts.
With the pale shadow hanging over the economy, experts believe the real estate market would be hard hit this year and that most investors would have to evolve quick survival strategies. “There is hardly any sign that the real estate market can be revived let alone recover any time soon,” says a property consultant, Martin Olubunmi, adding “there is a glut in the market and nobody is even asking. Prices are falling but there is no funding source since the banks are still undergoing restructuring and off-shore funds dried up since last year because of the uncertainty in the political arena.”
Also not optimistic about a likely rebound of the market anytime soon is the Chairman of the Housing Faculty of the Nigerian Institution of Estate Surveyors and Valuers (NIESV), Chief Kola Akomolede, who has a major presence in the Ikoyi-Victoria Island-Lekki property up-scale market. He argues that the gloom in the real estate sector would deepen this year if the banking sector does not recover soon. “There will be no improvement in the real estate sector if the banking sector that funds it is not stabilised to enable banks provide funding for housing development and purchase. Honestly, I don’t expect it to be better than what it was at the close of last year when there is an unprecedented glut in the market across the nation. It will even be worse in the Lekki axis with the resolve by the Lagos Government to revoke titles of undeveloped land.”
Lagos State, for instance, wants all those allocated land in every part of the state to develop them. Governor Babatunde Fashola has always underscored the importance of construction to the growth of any economy. The government recently warned land owners to move into site as it embarks on its housing initiatives.
It said “allottees left their land allocations undeveloped after several years of the said allocation, thereby encouraging illegal activities of squatters with unsightly shanties that have continued to fester within the scheme at an alarming rate.”
This move by the government has further fueled the glut in that axis, Akomolede explained. “Since most people who cannot get funds to develop have put their land in the market, worsening the glut because they don’t want to lose their money along with the land. If the economy does not change I don’t see how the property market will change.”
No Signs of Rebound
A rebounding property market is measured by uptake and not by enquiries. However, since the bubble burst last year there have been enquiries but these have so far not been backed by uptake, a worrisome trend that is shaking even big-time players in this once vibrant market, explains Humphrey Okeke, a property consultant in Abuja . “I wonder where some people got their statistics from to speculate that the property market would rebound soon. The big real estate firms all put their big properties in the market before the end of last year and even this week some heavy weight properties entered the market. Everybody is seeking to sell and nobody is buying,” he said.
Signs of a property market recovery are usually unmistakable, adds a property broker, Emeka Nwainopa. “A rebound will depend on how fast the larger economy recovers, complete with flow of funds from savings. We noticed that people are holding on to their money also because of political uncertainty in the country.”
Regardless, a few buyers are showing signs of entering the market but not the traditional bulk buyers who are allegedly steeped in bank debt. Small time housing developers not in the class of UACN Properties Plc, Legacy Realties, Grant Properties, and a few others are left struggling. Many real estate companies and developers no doubt suffer on account of the downturn and are either heavily downsizing or are out of business. Majority of new comers trying their hands in real estate have got their fingers burnt and have been weeded out by the credit crisis. “Some developers are asking bigger ones to buy their projects at prices that will enable them pay their bankers,” explained Rafiu Mohammed, a senior management staff of a government owned property development company in Abuja . “We have been approached and are considering taking over the estates because they fall within our building specifications and price range. Details are being worked out.”
Time to Buy
The property market may seem out of sorts right now but currently offers the best deals and opportunity to prospective buyers.
“Now is the time to buy, because everybody is eager to sell even at threshold prices,” says a mortgage banker, Andrew Eguavon. “No need to think of uncertainties because what you’re buying is solid and once you got it from an authentic seller then you’re home free and in a few years time when the economy is put right, you’ll be glad you took the decision.” Eguavon believes prices are still tumbling but that they would stabilise at the first sign of economic recovery.
The property market, he says “is awash with relatively cheaper priced properties and so prospective buyers should expect to get good deals in all segments of the market, but they should be cautious and verify titles before parting with money.” He urged the government to stimulate the economy by engaging in construction projects, particularly in the housing sector since no bank is prepared right now to advance construction loans to developers.
Also affected is the building materials sector where big-time stockiest complain of low patronage and client indebtedness. “Everybody is affected in this downturn and we are hoping that the economy will improve so we don’t have to cut jobs and worsen the plight of families,” said a dealer in building materials.