Market slowdown continues as investors watch economy, political environment

The first half of 2014 is ending with a relative slowdown in Nigeria’s real estate market and close watchers of the market fear that this situation will continue to the end of the year as investors watch the economy, security challenges and the heated political environment in the country.

These market watchers note that the market may have seen some level of investment, but point out there would have been much more investments if the security issues had been sorted out and the political environment was more stable.

“We are likely to see a slowdown in activities in the market because people are going to be a lot more cautious with where they put their money,” Chudi Ubosi, principal partner, Ubosi Eleh & Co, told BusinessDay in an interview.

“I differ from the popular thinking that election time brings increased activities in the market and my reasons are simple. By the time the killing and violence that characterise elections begin, they create a kind of apprehension that makes people wonder whether there will be war or they will be forced to leave the cities. This is not good time for investment,” he said.

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Ubosi, who is also the Africa president of International Real Estate Federation (FIABCI), noted that Nigerians could not really see any dynamism in the economy, explaining that there were a lot of factors dampening the market situation, such as insecurity, the heated political environment and uncertainties in government policies, all of which, he stressed, were negatively affecting the economic outlook.

“We are not anywhere near the kind of activity we saw in the pre-recession era. From the financial angle, none of the banks is ready to fund real estate transaction or development. When you approach them, they tell you straightaway they don’t fund real estate development. If you are building a block of 10 flats, they can agree to fund it on the condition that you provide the off-takers,” he said, maintaining that real estate was still performing below par.

“I am not sure that the market is doing well. When I look at our inventory, that is the properties we have in the market, I see that never in the history of our practice have we had such a huge number of unsold and unrented properties. These are fantastic, well-located and well-appointed properties, yet we cannot find buyers for them. People are interested but the capacity to conclude the transaction is missing,” he said.

Reminded that the recent rebasing of the nation’s GDP has boosted confidence in the economy with many foreign investors warming up to come to the country, Ubosi said the rebased GDP’s challenge with real estate was that there was no capacity for investors and developers to provide the needed space in terms of quality office space and international standard hotels for businesses.

“Despite the growth in the economy and the rebased GDP, many businesses are still operating from old buildings; there are very few new buildings, and those that are available are going for outrageous rents of $1,000 per square metre. My position here is that the rebasing of the GDP is fine but there is no capacity to provide the real estate space to satisfy rising demand,” he said.

Ubosi affirmed that foreign investors were really interested in investing in this economy, pointing out that some of them who wanted to invest in real estate were discouraged by the price of land.

“An investor who needs three hectares of land in Victoria Island or Ikoyi is scared by the price of this size of land, especially when he compares it to what obtains in his home country,” he said.

Chuka Uroko