Analysts say growth in the sector will outpace GDP in the fourth quarter of the year with a modest growth in the range of 1.2 percent to 1.5 percent quarter-on-quarter this year.
These positive prognoses are coming at a time when the sector is grappling with low demand, over supply in some cases and high vacancy rates.
The World Bank growth forecast for 2018 says Nigeria, the presumed largest economy in Africa, will grow 2.5 percent which contrasts growth in Kenya that will jump by 5.5 per cent, Tanzania 6.8, Senegal 6.9, Cote d’Ivoire 7.2 per cent and Ethiopia, a whopping 8.2 per cent.
The slowdown in real estate and construction services has reduced significantly, leading to a drop in the a negative growth the sector recorded in the last quarter of 2017 from -0.55 percent to 0.46 percent which the analysts say is a reflection of the sector’s journey to recovery. According to them, the rebound in the oil market has had spill over effects on the Nigerian economy and one of such effects is its influence on the activity in the real estate market which has seen a marginal uptick in office market enquiries recorded in Q4 2017.
Nnenna Alintah, a researcher at Broll Nigeria, recalls that the single-largest transaction to be concluded in the quarter of 2017 was a lease acquisition of over 2,000 square metres in the Lagos CBD of Victoria Island, pointing out that demand in the quarter and for the year in general, was driven by a diverse set of industries including energy, technology, financial and professional service sectors. Damola Akindolire, Executive Director Real Estate at Alpha Mead Group, explained that assumptions on the growth of the sector are premised on key growth indicators in the wider economy which include increased liquidity in the economy.
“The federal government has redeemed maturing treasury bills refinanced with the Eurobond and yields on Treasury Bills continue to decline and will hover between 7 percent and 8 percent as time goes on, leading to weak appetite for government instrument and preference for other areas of the economy”, Akindolire said.
He explained further that this preference would motivate investors and lenders to consider the real sector which would in turn speed up the rate of growth in the sector, although that might not necessarily lead to a reduction in interest rate. Increased government spending is also expected to lead to increase in economic activities and disposable income. Hopefully, the budget would be approved soon for implementation, otherwise it will put the fragile recovery in the economy in jeopardy.
“The steady decline in headline inflation to 15.88 percent from 15.91 percent recorded in the previous month, when compared with the previous year, shows there is good news for the sector”, he noted, adding, “we anticipate a stable economy in line with the economic growth and recovery programme (EGRP)”.
At the moment, a few days to the end of the first quarter of the year, the sector is still struggling. But this is to be expected from a sector which, according to Erejuwa Gbadebo, CEO, International Real Estate Partners (IREP),has recorded eight straight quarters of negative growth. Though Akindolire expects strong demand in the residential (land sales), hospitality services and industrial warehousing considering the sight growth in the manufacturers index, rents in these segments of the market remained largely stable in the last quarter of 2017.
“Rental growth is very likely to be stalled in 2018 due to low levels of demand relative to supply available within the market.
Moreover, over 50,000 square metres of space is set to come on to the market in 2018, placing further pressure on positive rental growth prospects”, Alintah noted in a Q4 2017 market report obtained by BusinessDay.
CHUKA UROKO
