The real estate market may have seen unexciting moments in the past couple of years, but it has not been a story of losses all the way as the market between 2006 and 2010 grew at a real average of 11.38 percent alongside wholesale and retail, building and construction, hotel and restaurant, which also recorded average real growth of 13.44 percent, 12.58 percent and 12.5 percent, respectively.
In 2011, these sectors, including real estate, in addition to the growth in the agriculture and telecommunication sectors, also posted double digit growth rates of 11.33 percent, 12.26 percent, 12.09 percent and 10.41 percent, respectively.
MCO Real Estate Limited (MCORE), a real estate finance and investment advisory firm, which disclosed this in its second quarter 2012 real estate market survey, also analysed the investment market, noting that the “recapitalisation of the Pension Fund Administrators (PFAs), maturity and re-financing of Assets Management Corporation of Nigeria (AMCON) bonds and divestiture of bank subsidiaries are all broad themes that point to the ongoing divestiture of real estate assets by Nigerian financial institutions.”
On the other side of the investment table, it added, “it appears that now is a good time to acquire institutional real estate assets at discounted prices that will show strong asset appreciation over the next few years.”
Munachi Okoye, MCORE’s CEO, noted that the Lagos real estate market, particularly the residential and retail sectors, are showing signs of renewed life, adding that the moribund luxury and super luxury residential market sub-sectors characterised by empty properties prevalent in Ikoyi are also showing signs of activity.
Reviewing the real estate finance and the money markets, Okoye pointed out that while lending rates are hovering around the 20-25 percent marks, rates on savings have remained in the region of 3-4 percent. He explained that the high lending rates are informed, in no small measure, by rising inflation rate, which is currently at 12.70 percent and the risks inherent in doing business in Nigeria.
“Sovereign bonds continue to yield above 15 percent; most companies unable to raise financing from corporate bonds due to their inability to compete with the yield on offer for sovereign bonds do not have any alternative other than to rely on expensive bank financing,” he said.