Nigeria’s real estate sector rides on pandemic to exit 18-month recession

…posts highest quarterly growth on record at 2.81% in Q4’20

After contracting for almost two years, the real estate sector in Nigeria, Africa’s largest economy, leveraged opportunity offered by the Covid-19 pandemic to exit recession in the fourth quarter of 2020, data compiled by the National Bureau of Statistics (NBS) shows.

At 2.81 percent growth in Q4, the first positive value since the first quarter of 2019, is 16.21 percentage points higher relative to Q3 2020. The last time the sector reported a positive GDP value was in the three months ended March 2019, and this has happened twice since Q1 2016 when the state-funded bureau started collating the data.

“Real estate is about the most attractive, currently, and we have seen a lot of traction during recessionary times,” Tayo Odunsi, CEO, Northcourt Real Estate, told Businessday in January.

Survey shows that some of the players in the sector made more money during the pandemic that they did as the uncertainty which came with the outbreak of coronavirus forced investors to channel their funds to the sector to hedge against the impact of the pandemic.

“People would still have demand for housing, even though there is a recession or a pandemic and if there is a lockdown. This holds opportunity for investors,” a Lagosbased real estate research analyst said.

According to Wale Ayilara, CEO, Landwey properties, a lot of real estate developers made more money during the pandemic than they had ever done.

“We made more money during the pandemic than ever before. I guess the case is the same for others, maybe they are not just talking,” Ayilara said.

According to the CEO, a recession, like the one reported in the third quarter of 2020 when Nigeria’s economy contracted for the second consecutive quarter to September by 3.6percent, doesn’t mean that money has disappeared, instead, it moves from one sector to another.

With that understanding, the real estate developer said his company had to re-strategize and channel its resources to develop products that were in high demand.

“Before the pandemic happened, we were about to start a project, but we had to move the funds to a different location,” Ayilara said.

Analysis of the GDP report by NBS shows that while the full-year real estate GDP growth of Q4 at -9.22 percent was lower than the -2.36 percent in the preceding year, the sector’s contribution of 6.38 percent in the review quarter was higher than the 6.21 percent it recorded in the corresponding quarter of 2019.

While the rate at which Nigeria’s property sector exited recession in the first quarter of 2019 stood at 10.33 percentage points, the fourth quarter emergence was higher at 16.21 percent.

Construction, residential and industrial segments of the property industry are expected to drive sector growth while yielding good returns for developers, investors and landlords.

The demand for residential real estate is expected to increase as work from home becomes a more permanent influence in space demand.

The increase in demand for warehousing amid a surge in e-commerce transaction in Nigeria is expected to fuel the growth of the industrial subsector.

Also, the construction of projects that were initially put on hold amid COVID-19 lockdown and the rebuilding of recently vandalized properties is expected to boost the expansion of the construction sector and thus, drive the growth of the overall real estate market in 2021, according to a pool of analysts.

“We expect to see growth in the real estate construction sub-sector as many projects that were put on hold amid the COVID-19 lockdown will commence,” Temitope Runsewe, CEO, Dutum Construction, said while expressing same optimism for industrial and residential real estate.