The Nigerian Property Market after COVID-19.

At the beginning of the year, some of us attended seminars and listened to discussions on the economy and real estate outlooks for the year 2020. One particular seminar on the economy comes to mind, where the Nigerian economy was analysed in three ways: on a best-case scenario, where oil, our major source of foreign revenue is trading above the Federal Government budget benchmark of $57 per barrel; a status quo where oil prices are at about the $57 benchmark and; a worst case scenario where it falls significantly below $57. We are now in the latter case mainly because of a significant decline in oil demand due to the COVID -19 pandemic and every part of the economy has been hit hard by the crisis. The Federal Government has imposed movement restrictions and social distancing at various degrees across the country to minimise the impact. Earnings of individuals, companies and the government have been gravely affected in these very uncertain times. To mitigate the effect of the pandemic on Nigeria economy, several relief packages from loans, grants, tax waivers, extended moratoriums on some loans, concessions, subsidies, food stimulus and the likes have been given by the Federal Government which are expected to get the economy back on track.

My thoughts on the property market are based on the assumption that this is a pandemic with a foreseeable end in the coming months.

On the residential property market, we expect landlords of rental properties to maintain current rentals while negotiations on rental payments in instalments with the guidance of real estate professionals will become common. Tenants would need some time to recover from the downtime and quarterly or semi-annual payments would give them some comfort while providing predictable and regular streams of income for landlords. This will also put pressures on property management professionals who would have to manage the foreseeable fluctuations in payment from tenants.

Commercial properties would also see landlords retaining rents at their current rates while tenants who have not been gravely affected by the crisis, would continue to meet their obligations. There could be the need to downsize office sizes as internal financial positions are reviewed. We however expect limited interest from foreign companies looking to start business in Nigeria. They are expected to minimise expansion plans for now while they consolidate their positions.

Coworking offices should see demand return. Though we have all learnt to become more productive with working from home and have created routines similar to the office including shared task applications and video conferencing, the need for human contact cannot be denied and this would make coworking offices who already provide the flexibility remain attractive.

The retail businesses have also been severely impacted as their business model is based on high turnover and efficiently managing their inventory. The businesses who are able to come through this difficult time could be the greatest winners of all. Properties used for events, fast food businesses, bars and restaurants should recover very quickly as people yearn for outdoor entertainment when the movement restrictions have been suspended.

However, foreign and local travel restrictions would linger on for a while, even after normalcy begins to return. This means hotels and other players in the hospitality sector who earn daily rates would still be feeling the impact, especially when their clients are not local.

Property purchases would decline in the coming months as individuals and companies take stock of their positions after the crisis. Developers who are well advanced in their projects will experience a lull period while they remobilise back to site and depending on the details of individual contracts, reviews may become unavoidable. This also implies extended delivery dates in conjunction with increasing construction costs due to the Naira devaluation. Developers who have not begun their projects would need to review their plans and funding strategies as banks and other financial institutions would review their lending decisions. Residential developers with committed homebuyers would need to lengthen the payment plans while innovative marketing strategies including price discounts to attract new buyers are expected.

One of the major lessons learnt during this crisis is the need to be more self-sufficient with our food and local production. Increased demand for rural land around good road networks for farming, storage and production are expected.

In general, revaluation of various assets would be necessary while new valuations would be based on how quickly the commercial banks are able to bounce back from the crisis.

The COVID-19 pandemic would leave a lot of people reflective. There would be individuals and companies who would resume their businesses and operations with a sense of new beginnings and opportunities. Real estate remains a good store of wealth and purchases at good prices would still continue.

Jide Taiwo & Co offers a range of professional services to meet new and existing client needs during this time and beyond. Contact our professionals for advice and guidance.

                        Olawunmi Olashore MRICS

1 thought on “The Nigerian Property Market after COVID-19.”

  1. Bashir Tajudeen says:

    An apt description of foreseeable developments in Nigeria real estate market.

Leave a Reply

Your email address will not be published. Required fields are marked *