Investors and sundry stakeholders in the Nigerian real estate sector have raised concerns over the sapping impact of the upcoming general elections on the sector which has remained in negative growth territory long after the wider economy exited a 15-month economic recession.
Besides present loss of income resulting from weak demand and reduced consumer purchasing power, these investors are also apprehensive of which direction the economy will take in the aftermath of the election.
“Right now there is a slowdown in investment because of the uncertainties in the political system. This slowdown will be there till the end of the second quarter of this year. Investors are being mindful of the outcome of the election,” Femi Akintunde, GMD, Alpha Mead Group, noted in an interview.
Many political parties are in for the political contest but, apparently, the February/March election is a contest between two major political parties, the ruling All Progressives Congress (APC) and the main opposition People’s Democratic Party (PDP).
Akintunde reasoned that whichever way the result of the election goes, it will impact on real estate, explaining that if the ruling party wins, settling down might take a long time as it did in its first coming in 2015 when it took the president about six months to set up his cabinet.
“If, on the other hand, the main opposition party or any other party wins, policy reversal will be likely and the business community, including real estate investors, is going to feel the impact of such reversal,” Akintunde said.
Already, in the run-up to the election, property prices have come down further from last year levels, as the market is receiving more assets from politicians seeking quick funds to contest elections.
The property market is perceived to be a haven for politicians for laundering money through proxies. They return to the same market to raise funds for their elections by off-loading the properties for quick cash when the need arises. Electoral contest into political office in Nigeria is capital-intensive and a high risk venture which banks avoid like leprosy.
“It is expected that many new assets will be coming to the market from people who want to run for elective positions. By simple economics, when supply outstrips demand, especially in an environment where you don’t have liquidity, price will fall. Again, because these people want quick cash, they will sell the assets at very low prices,” Gbenga Ismail, an estate surveyor and valuer, told BusinessDay on phone.
Ismail observed that already, prices have started dropping in Abuja and it is speculated that the coming election could be responsible for the drop.
“Already the market has seen over 10 percent drop in prices and it can only get worse as we move closer to the election proper,” he added.
This development is deepening worrisome situation in the market which, in the last 24 to 30 months, has been grappling with widening vacancy rates and falling rents, rent payment arrears and reduced up-take of new office and retail spaces.
A quarter one 2018 report by the Nigerian Bureau of Statistics (NBS) shows that the sector plunged deeper into recession. Though the sector showed signs of rebound in Q2 2018 as figures from the NBS show, analysts hinge those good but negative figures on improved infrastructure and capital injection into the sector by domestic investors.
The sector reported Gross Domestic Product (GDP) growth of -3.88 percent in Q2, compared to the -9.40 percent rate recorded in the previous quarter. There was a further improvement at -2.34 percent growth in Q3 2019, but the sector still remains in negative trajectory since the last quarter of 2016.
Analysts advise, however, that the present challenges in the market provide huge opportunities for savvy investors who are patient and have a long-term view of the market.
“A time like this, when distressed assets are coming to the market, is time for investors to take position in the market,” an analyst, who craved anonymity, posited.
CHUKA UROKO
