Nigeria’s prevailing macro challenges have put immense strain on the country’s real estate sector and have affected the property market as sales have dipped significantly, and many completed residential buildings, particularly in Lagos and Abuja, remain vacant, according to investment medium Proshare.
While taking a critical look at the state of real estate in the country, the Proshare report noted that in as much as national demand remains very strong, affordability has been eroded on the back of the economic slowdown.
According to the report, there is squeeze in consumers’ purchasing power and the rising cost of imported building materials, which accounts for a considerable proportion of the final sales price of residential units, is taking its toll on the ability of people to rent or own houses.
“The latest national accounts from the NBS (National Bureau of Statistics) show that in Q1 2016 the real estate sector contracted by -4.9 per cent y/y, compared with growth of 0.8% recorded in the previous quarter,” the report noted.
“Although the 2016 budget has been approved and signed off, we understand that funds for existing housing projects have not yet been released. Based on our channel checks, there has been mass retrenchment in the construction sector due to the economic downturn. The construction sector contracted by -5.0 per cent y/y in Q1 2016,” the report further stated.
While looking at other reasons why the problem bedevilling the nation’s housing sector has reached roof top in the past few months, the report recalled that the Federal Mortgage Bank of Nigeria (FMBN) recently stopped its estate developers’ loans scheme due to paucity of funds. But according to the report, recapitalisation of the FMBN may be required to meet estate developers’ needs.
While looking at the way forward, the report said, “To this effect, the FMBN, which was established to provide liquidity to the Nigerian mortgage sector and affordable housing to the low and medium income segment, has now signed a MoU with the FHA.”
“The two public bodies are jointly exploring options for housing delivery through a number of on-going schemes such as the Accelerated Housing Scheme for selected federal MDAs and the Federal Integrated Staff Housing Scheme for federal civil servants.
“In developed economies like Hong Kong, China and the US, housing investment focused policies have been identified as a strategic tool deployed in stimulating the economy. We hope that, subject to its obvious fiscal constraints, the FGN will explore this option to drive growth, “the report said.