The nation’s economic woes crept into the housing industry, resulting in rise in building material prices and low construction activities. DAYO AYEYEMI writes
Ninety days into 2017, no impressive results have been recorded in the property sector as new projects are being suspended, while existing ones are yet to receive attention owning to cash-crunch. The real estate’s contribution to Group Domestic Products (GDP) in the last quarter (Q4) of 2016 was 7.59 per cent compared to 8.26 per cent in Q4 of 2015, representing 5.8 per cent increase.
However, three months into the year, the sector is yet to pick up as abandoned properties adorn highbrow streets in Nigerian cities of Abuja and Lagos. Also, the fact that the nation’s 2017 budget is yet to be passed by the National Assembly has reduced spending in the sector.
Due to the harsh economy, New Telegraph noted that many landlords and property managers in Lagos and Abuja had introduced various measures such as rent reduction and eradication of advanced payment to keep existing tenants while attracting new ones in order to reduce dormant houses.
Currently, hundreds of vacant luxury houses exist in Ikoyi and Lekki neighbourhoods in Lagos state, Maitaima and Asokoro districts of Abuja, the nation’s capital city, due to harsh economy. According to analysis by Bismarck Rewane-led Financial Derivatives Company (FDC), during the period, house rent and prices fell slowly in old neigbourhoods, but higher for better quality properties, while several uncompleted projects still linger.
“Many developers cannot afford to pay for the finishing of their properties; finishing cost is very high due to high import content of finishing materials, while prices of building materials soar,” analysts said.
Building materials’ market
In the last three months, price of reinforcement bar (iron rod) rose steeply to N270, 000 per ton in early March from of N155,000 per ton in March 2016. At the end of March 2017, the price of 12 milimetres (mm) of iron rod fell to N235,000 per ton due to Central Bank of Nigeria (CBN)’s intervention in forex.
However, home builders expect the price to fall more as the naira is being strengthened against dollar. Apart from cement price, which was stable at N2,300, prices of finishing materials such as wall and floor tiles, sanitary wares, roofing and ceiling materials also soared astronomically due to forex restriction.
Nothing much was heard about the promoters of iconic residential, commercial real estate developments in the last three months as construction activities on the Eko Atlantic City was slowed down since Eko Pearl Towers, a 24-storey state-of-theart residential building, located in Victoria Island, was delivered by Messer Eko Pearl Construction Company last quarter of 2016.
On both federal and state governments’ housing programmes, about 300 residents have benefitted from the Lagos State’s Rent-To- Own scheme for specified housing estates in the state, while the Governor, Mr. Akinwunmi Ambode, has promised to sustain the policy with the partnership of private investors.
The state Commissioner for Housing, Prince Gbolahan Lawal, said that the government currently had over 4,000 housing units yet to be subscribed to across different areas of the state. According to him, government has already mapped out sustainability strategy such that upon exhausting the available units, partnership would be ignited with the private sector for another round of 20,000 housing units.
At the national level, about 32 states have granted land to the Federal Ministry of Power, Work and Housing for the national housing programme, and the plots are being surveyed and cleared for the commencement of housing units’ construction.
Minister of Power, Works and Housing, Mr Babatunde Fashola. stated that the Federal Government would liaise with state governors in order to cite its mass housing estates in locations acceptable to residents of each state.
The planned recapitalisation of the apex housing financial institution, Federal Mortgage Bank of Nigeria (FMBN), to deepen mortgage penetration in the country, is yet to see the light of the day. On roads, the Federal Government has also intensified efforts in ensuring commencement of works on Lagos-Ibadan Expressway, Second Niger-Bridge, Enugu-Onisha, Enugu-Port Harcourt, Sokoto-Tambuwal-Kontangora- Makirra road , Ilorin-Jebba- Mokwa road, Apapa-Oshodi and Abuja-Lokoja road projects in the last three months.
Expressing fear for the sector, lecturer and member of faculty, Lagos Business School, Dr. Doyin Salami, said that N13 trillion total budget of both federal and state government in 2017 was not enough to generate activities to grow the economy out of recession. According to him, involvement of private participation to fund both housing and infrastructure projects has become imperative to revamp the economy. He said there was need to restructure the country in a way that will allow private participation fund most of the projects. Justifying need for private capital, he pointed out that real estate sector was about seven to eight per cent of the economy, adding, “real estate sector has been shrinking.”
“What will happen to it in 2017 will depend on what happens to the economy generally. Housing takes its cue from the general economy,” he said. However, Rewane predicted likely fall in the cost of building properties, adding that real estate market would pick up gradually if the economy follows a recovery path.
He added: “There is positive but lagging correlation between economic recovery and real estate market upturn.” On opportunities for the sector, Rewane pointed out that N20 billion’s Real Estate Investment Trust (REIT) on the Nigeria Stock Exchange (NSE) market was expected to lift the Nigerian retail industry, adding, “It guarantees returns for investors and it is suitable hedge against inflation.”
It is expected that as the nation’s economy improves in the second quarter, housing sector will come out of its current dormant state.
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