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Experts in the real estate sector of the Nigerian economy have said that the impact of the deadly coronavirus on the sector may be the worst in history, projecting that the sector could be losing an estimated 50 percent of expected revenue by the turn of 2020.
The whole of Africa is in for it with Nigeria and Angola predicted to be the worst hit in terms of job losses and unemployment levels, the experts added, fearing that the current experience could take the sector back to the 2005 global economic crisis situation.
The deadly virus which has proved that it is no respecter of persons, places or positions, is hitting global real estate so hard that even mature markets like the UK, US and others are caving in as the impact of the virus weighs heavily on them.
In the US, for instance, there are over 43 million renters nationwide. The rental market makes up nearly 40 percent of all housing in the country where it is reported that at least 20 million jobs were lost in April.
While out-of-work renters scramble to make their payments, landlords are wondering how to service an avalanche of debt and unpaid taxes.
According to an Urban Institute Survey from last month, almost half of renters report some kind of financial hardship. The cascading effect of unemployment is severe, especially in shut-down cities like New York, where nearly 70 percent of the population rents.
The Nigerian experience seems worse. According to a Pison Housing Company report on ‘The State of the Real Estate Market’, about 80 percent of Nigeria’s 200 million population are renters and majority of them are the ones currently facing pay-cuts and job losses in various workplaces.
Chudi Ubosi, principal partner at Ubosi Eleh+Co, estimates that 60 percent of renters in the country won’t be able to pay their rents in the coming months, meaning that six out of 10 renters will default in their rent payment on account of COVID-19 impact.
At a recent webinar hosted by the Lagos State branch of the Nigerian Institution of Estate Surveyors and Valuers (NIESV), experts who spoke on the theme ‘Effect of COVID- 19 on Real Estate in Africa: The Impact of Foreign Direct Investments (FDIs) and Palliatives’ noted that the impact of coronavirus on real estate is becoming increasingly severer than the global economic crisis.
“Companies are struggling financially and Nigeria is moving towards a situation where people can’t pay rents amid wage cuts. We are likely to see a 50 percent or more reduction in revenue to the real estate sector,” Jemil Dawodu, managing director, CBRE Excellerate Nigeria, said.
Dawodu was, however, optimistic of capital inflows into the economy, saying, “Regardless of the gloomy economy, FDIs will still come into Nigeria as the nation is an emerging market as was witnessed in the last recession.”
According to him, there might be a reduction in FDIs returns, but there is hope that foreign investors would still come in because opportunities are there in Africa and the continent hasn’t started to scratch the surface.
He argued that if an investor takes co-working, for example, it is a new concept in Africa, predicting that post-COVID 19, that segment of the market is going to see a huge number of investments as people are going to change in line with market dynamics.
Adedotun Bamigbola, NIESV chairman, noted that African real estate market was not immune from the shocks of COVID-19, stating that the impact was visible and hitting the high-end tourism/leisure, commercial and residential real developments in the short to medium term.
He said it was obvious that most proposed developments in this direction would be suspended for 12 to 24 months in different parts of Africa, especially in countries where oil contributes over 60 percent of their gross domestic product.
To cushion effects of the pandemic on real estate investments in Africa post-COVID 19, Bamigbola said different African governments, through their central banks and mortgage financing regulatory agencies, should urgently work out different palliatives for real estate industries in order to sustain investments, save millions of low-income jobs and sustain the production of housing for low to medium-income earners.
