As the coronavirus continues to spread, there is fear and trepidation in the air among Nigeria’s real estate community, especially as travel and other economic activity have slowed or stopped.
Their apprehension also arose that several sectors have taken a heavy beating, except real estate. And with social distancing, house showings may slow down while pullback by buyers will take momentum out of the market, which could see some price falls.
The leading real estate experts further revealed that with the stock market crashing and layoffs ramping up, real estate sales will take a hit over the coming weeks and months. They say, there might be declining interest from home buyers as a result of the coronavirus outbreak.
According to them, coronavirus will take out a group of buyers – those adopting a wait-and-see approach or those simply unable to buy due to reduced income. But there’s another group of buyers: those who are in jobs but who face uncertainty about how coronavirus will affect their pay or whether they will keep their job at all.
The Nigerian property market has been weak for some time, and rents have fallen fairly drastically in major cities such as Abuja, Lagos, and Port Harcourt for quite a while now. There appear to sign it could be stabilising but pandemic threatens that notion.
Some areas in Lagos market have been strong and the vacancy rates are very low but there’s no doubt coronavirus will increase caution among many buyers and encourage a lot of sellers to defer transactions.
Specifically, industry watchers say that except the government takes necessary steps to strengthen the economy, the pandemic will push the Nigerian economy into another recession.
The Guardian research shows that key players expect government to announce fiscal stimulus package to cut down coronavirus negatively impacting the sector and the economy as a whole.
There will be negative effects on employment as it will be a short, sharp shock to the economy.
The practitioners are already divided on the impact it would have on real estate and house prices. While some argue that it will be negative – prices will go down. Others believe the property market will develop a bit of momentum with the interest rate cuts and the easing of credit conditions.
The Chairman, Nigeria Integrated Social Housing Cooperative Society Limited, Yemi Adelakun said, one of the immediate impact of Corona Virus is delay in investment generally and real estate in particular.
In the US, people offloaded their stocks because of uncertainties. Similarly, decision to buy or develop properties will be negatively affected.
Adelakun said: “Affordability may also be eroded in the event of depreciation of Naira value against US dollars. Already, the Federal Government’s decision to cut back on the 2020 capital and recurrent budget will also affect real estate negatively. You will recall the recent increase of Value Added Tax (VAT) from five to 7.5 per cent. The VAT increase on its own will have negative effect on home affordability, especially for low and medium-income earners.
He urged the government to ameliorate the situation by reducing interest rate on mortgages like the CBN has done in other sectors; increase access to mortgage finance through special dispensation approved for farmers and SMEs to obtain loans from all banks at special rates.
“Moratorium on mortgage repayment will also be helpful in case of prolonged lockdown.
In order to motivate development of affordable housing Government should consider making land available and granting tax relief on building equipment and materials,” he added.
An estate surveyor and professor at Federal University of Technology Minna, Muhammad Bashar Nuhu said that the impact would be more on the supply side. “This is so because of restricted movement of the expatriates particularly as it relates to large development sites.
“Secondly, the exchange rate is an issue and will definitely affect the procurement process and delivery. Similarly, the expected completion period would equally be affected,” he stated.
Nuhu urged the government to continue with the palliative initiative and the rescheduling of financial obligations. His words: “Furthermore, more money should be made available to people to cushion the effects on the real estate affordability and housing prices.”
In his submission, the President, Commonwealth Association of Surveying and Land Economy (CASLE), Mr. Olusegun Ajanlekoko explained that the immediate impact would affect the top to the bottom of the pyramid of the value chain. He said: “Globally, low economic activity affects the construction sector in a dramatic way. Construction and sales will nosedive.
“But for a shrewd developer, this is the best time to start development because of the cheap funding that is now available through the drastic reduction in interest rates. Albeit building for the immediate future. But generally, it’s bad news all round. Timely delivery is no longer achievable. And new projects will be on hold.”
Ajanlekoko said: “Government should introduce an economic stimulus to the industry especially where funding is concerned. A halt on payment of interest charges on cost of funding should be put in place to help developers cut down on their losses.”
The first Vice President, Nigerian Institute of Town Planners (NITP), Olutoyin Ayinde, stressed that coronavirus has a global effect on most activities, especially on economic activities.
According to him, the present situation is not strong enough to force down housing prices. But, there will be a temporary lull. In due time, there would be a bounce back. “Even if you can do business online, check the house/apartment you like and make payment online, would the keys to the property be received online?”
An estate surveyor and valuer, former president, International Facility Management Association (IFMA) Nigerian chapter, Pastor Stephen Jagun, admitted that every economic transaction is grounding to a halt.
“What is paramount in the mind of everyone now is survival. Like in other climates where the economy is short down, I believe that it’s going to affect real estate.
“Even those paying rent will have to generate economic activity to have the capacity to pay. Hence, it may affect the ability of some tenants to pay and out practitioners in further challenge of rent collection as at when due.
Some people may even lose their jobs as things are going. But they’ll still live in a house.” Jagun advised the government to cushion the effect of the slowdown in economy on businesses. “This will help the economy to pick up,” he added.