The lamentations heard in households and various sectors of the Nigerian economy as a result of hardship in the country is, by no means, less strident in the real estate sector where investors, especially developers, are groaning under the crippling impact of government’s monetary and import policies.
These investors are also lamenting falling demand and rising vacancy rate, which close property market watchers estimated at 20 percent in the first quarter of this year, meaning that it could be higher by now because nothing has improved.
In the past 12 to 18 months, the real estate sector has been very dull with falling demand arising from dwindling income and declining spending power. There has also been rising rent default and vacancy rate also arising from loss of jobs and general unemployment, among many others.
The most deadly blow on this sector comes from government’s policies, especially the foreign exchange and import policies, which have ambushed developers and further crimped housing supply to the market
“What is affecting the market generally is not just the forex challenge, but also the import policy of the government,” says Omochiere Aisagbonhi, MD/CEO, Omais Homes, wondering if those who formulate policies for this country do not know what damage they are doing to the economy as a whole.
It has been a struggle for the developers and there is no support or encouragement from government and banks are not lending any more. “We have found ourselves in a situation where we do not know where we are going; what we have seen in the past 12 months is much more than what we have experienced in the past 12 years of being in this business,” Aisagbonhi says in a telephone interview.
In the rental market, both landlords and estate agents are jittery, as rents and commission have reduced because some tenants are defaulting in rent payment while others are practically unable to pay due to considerable reduction in disposable household or company income.
Olumide Osunsina, MD/CEO, Megamound Investment, developers of the over 1,000-units Megamound Estate in Lekki, Lagos, discloses to BusinessDay that it was always a struggle getting some residents of the estate to pay their service charge.
“But these are people who worked in banks and oil companies that have lost their jobs and therefore have no income; their concern now is how to eat and be well with their families”, he noted, blaming the situation on the harsh economic condition in the country which is impacting negatively on families and their income.
The high cost of owning homes has made the country one huge rental market where available record estimates that 80 percent of the 170 million people in the country live in rented accommodation and spend about 50 percent of their monthly income on house rent.
The rent default situation in the market has left many of the estate agents including estate surveyors and valuers who are estate agency professionals in dire straits, leading to loss of part of their legitimate instrument of income.
“About 80 per cent of all properties under my care have defaulting tenants who were previously meeting up their obligations; some sectors, including oil and gas that were hitherto known to offer job security have been the worst hit lately”, Orimalade Olurogba told BusinessDay.
Continuing, Orimalade said, “what is most worrisome about this development is that the sectors, which were termed to be secure, such as the oil and gas industry, are now the jobs that are most insecure. A lot of people are being retrenched; the high end or the upper middle class people working in oil companies and who live in Victoria Garden City (VGC) and Lekki Phase 1 and other areas whose rentals are N4million and above are struggling”.
