Economic and political factors will drive real estate market in 2008 —Bassey
Font size:
Efiong Bassey
Efiong Bassey is the Mortgage Bankers Association of Nigeria (MBAN) national vice president and the managing director and chief executive officer of Omega Savings and Loans. He says the real estate market was upbeat towards the end of last year, hoping that a combination of factors will push the market further up this new year He spoke with CHUKA UROKO,
2007 in retrospect 2007 was particularly an interesting period for housing. One could however, describe it as a mixed bag or middle of the road situation in developments at the real estate market. This is because there was a boom, a glut and a lull within the year.. There was a slow down in activities for sometime in the year, but towards the end, the market was upbeat. One could attribute the sudden change to the pre and post election issues and of course the rule of law which made it possible for people to be forth-coming with transactions.
Also, the activities in the capital market had a down-side effect on the real estate market because the market was very active with attractive returns and people in the short run took advantage of it.
However, in the middle and down end of the market, it was almost an upbeat activity all through. The low and middle-size houses were easily sold, transferred and transactions were quite happy then. This reflected the state of the economy and also the activity of the equity market. The banks were more forth-coming with lending and a lot of people were given purchasing power which otherwise they didn’t have before.
Inter-play of demand and supply
There is never a time supply of houses will equate demand in Nigeria and will never do so in a long time to come. There was however, an encouraging attempt by the various stakeholders to increase supply but there were other impediments that limited this attempt at the supply end of the market such as access to land, cost of transfers, high cost of building materials, multiple taxation, etc. Therefore, demand will always transcend supply and will do so for a long time to come.
FG’s offloaded property
Let me draw a distinction here between supply as what is available and supply as an increase in the quantity of what is available. If you are just running around what is available, that does not translate into supply. If there is a change in the tenancy of a building, supply has not taken place and so, there is no increase in the housing stock. What has happened in the case of Federal Government’s property is an exchange or transfer of title in what is available. So, the offloading of its houses was merely an exchange of ownership of those houses and not an increase in housing stock.
I must confess I don’t know what the intensions of the government were in selling off those property . But I think, putting the houses on the market meant the government wanted to free its cash in those houses and channel the proceeds to other purposes. Government is no longer in the business of housing development. I don’t think government has a duty to provide houses for the civil servants because it has a duty to house all of us. So, who will the government house? What the government should do is to increase intervention in policy framework in making housing available which will come in terms of policy, incentive and subsidy, and not in physical building of houses.
By so doing, it is encouraging those who want to build mass housing. It can give such people tax holiday, some rebate or make land available to them or encourage first time home buyers with equity loan which they have to pay over time at concessionary rates. This, I think, is what government should do and not involving itself in physical building of houses.
I think government’s monetisation policy leading to the offloading of its houses was a commercial decision of relieving itself of what it did not need in order to channel the proceeds to more socially beneficial purposes.
Just think of it: How many people benefited from the 1004 estate, for instance? It was only 1004 civil servants occupying the 1004 flats. These people were actually living for rents far above their income. We had cases where civil servants whose salaries could not afford three-bedroom flats in Bariga were living in a houses in Ikoyi whose rents were more than N3.5 million per annum.
Housing deficit or unaffordability
We really have housing deficit. It is an old story but it is real. The issue of available houses not being affordable is a matter of who want the houses ? As far as I know, there is no empty house anywhere or one that is lying idle because nobody can pay for it. It is not a question of affordability but about the quantity that is available. Over the last ten years, no single house has been built by the government. FESTAC was built in the 70s. There has been no housing renewal ever since and all we have had is decay in infrastructure and other facilities.
Expectations in 2008
I expect there will be improved effort on the part of all the operators which include the government, the players and the consumers. It is a long list, including all those in the value chain.
I see in the new year a situation where there will be a housing co-operative approach to home-ownership. There will also be homeowners association and government will fastract its policy intervention that will encourage homeownership to the extent that citizens will begin to have a sense of commitment or stake in the country.
In other countries of the world where mortgage culture is strong, you hardly hear that people burn houses because they have a stake in them.
If there is a riot in private estates, for instance, houses are hardly burnt because residents have a stake. The culture of home maintenance will be there because if the house is taken on mortgage for 10-20 years, the value of the house has to be maintained throughout this period.
Factors that will derive real estate market in 2008
The factors that will derive real estate market this year will be a combination of political and economic factors because I think none can survive on its own. You can’t have a vibrant polity without a stable economy and there can’t be a vibrant economy unless there is a peaceful political terrain. I hope there will be government policies that will lead to the growth of the economy and that growth will drive the need for housing development.
I see expansion of housing development into the hinterland and a deliberate effort by the government to decongest the cities and urban areas; there will be effort to arrest the rural urban drift and the financial institutions will be more generous in their consumer lending which includes mortgage finance.
I also foresee a bullish action in estate development. Because the economy is becoming more and more stable and strong, there will be economic empowerment in terms of employment generation.
I also see a changing trend in inflationary rate. If inflation is not pushed down further, it will maintain a single digit rate. There will be stability, if not appreciation, in the value of the naira. All these are on the economic side.
Politically, more people will get involved in governance because the stake is becoming higher with the rule of law in place. By this, more people will be empowered economically, leading to increased investment in performing sectors of the economy.
In the new year 2008, the real estate market will be a gold mine for investors.
Operators in the sector should do all that is necessary to ensure they take the industry beyond where it is to where its peers are. This will involve capacity building, best practices and ethical standards in operation. It must be creative, innovative and ready to face the challenges known to us. We must get out of the box because we are facing so many challenges that are known to us. We must do all the things that are required from us as operators
Banks’ enhanced capital base and housing finance
How the banks’ enhanced capital base will affect the real estate sector or any other sector for that matter depends on what those banks want to do with the funds available to them.
There is no forcing them to do something with their money because they are into business. If they see good returns in real estate business, they will definitely put their money there. If they see better returns in maritime or oil and gas, they will put their money there.
The real estate sector is just one little aspect of the totality of where they could apply their money. The difference is that the real estate sector is a long term thing, a long term race, but in the other sectors, you can have a short term vision.
I don’t always understand what people mean when they say that mortgage institutions do not perform up to expectation. I want to draw attention to what really determines the success of any banking institution. There are many parameters that determine the health of any bank and central to these parameters is management. The liquidity of any bank is a direct consequence of what management does with the funds available to it. The earning, of course, depends on the kind of investment that the management does.
What will lead to increase in housing stock is demand. If there is strong demand which will come from empowerment, people will want to own houses and if this is the case, banks will be encouraged to give loans to estate developers. So, the area the banks will put their money depends on where there is high return on investment.
Also, the activities in the capital market had a down-side effect on the real estate market because the market was very active with attractive returns and people in the short run took advantage of it.
However, in the middle and down end of the market, it was almost an upbeat activity all through. The low and middle-size houses were easily sold, transferred and transactions were quite happy then. This reflected the state of the economy and also the activity of the equity market. The banks were more forth-coming with lending and a lot of people were given purchasing power which otherwise they didn’t have before.
Inter-play of demand and supply
There is never a time supply of houses will equate demand in Nigeria and will never do so in a long time to come. There was however, an encouraging attempt by the various stakeholders to increase supply but there were other impediments that limited this attempt at the supply end of the market such as access to land, cost of transfers, high cost of building materials, multiple taxation, etc. Therefore, demand will always transcend supply and will do so for a long time to come.
FG’s offloaded property
Let me draw a distinction here between supply as what is available and supply as an increase in the quantity of what is available. If you are just running around what is available, that does not translate into supply. If there is a change in the tenancy of a building, supply has not taken place and so, there is no increase in the housing stock. What has happened in the case of Federal Government’s property is an exchange or transfer of title in what is available. So, the offloading of its houses was merely an exchange of ownership of those houses and not an increase in housing stock.
I must confess I don’t know what the intensions of the government were in selling off those property . But I think, putting the houses on the market meant the government wanted to free its cash in those houses and channel the proceeds to other purposes. Government is no longer in the business of housing development. I don’t think government has a duty to provide houses for the civil servants because it has a duty to house all of us. So, who will the government house? What the government should do is to increase intervention in policy framework in making housing available which will come in terms of policy, incentive and subsidy, and not in physical building of houses.
By so doing, it is encouraging those who want to build mass housing. It can give such people tax holiday, some rebate or make land available to them or encourage first time home buyers with equity loan which they have to pay over time at concessionary rates. This, I think, is what government should do and not involving itself in physical building of houses.
I think government’s monetisation policy leading to the offloading of its houses was a commercial decision of relieving itself of what it did not need in order to channel the proceeds to more socially beneficial purposes.
Just think of it: How many people benefited from the 1004 estate, for instance? It was only 1004 civil servants occupying the 1004 flats. These people were actually living for rents far above their income. We had cases where civil servants whose salaries could not afford three-bedroom flats in Bariga were living in a houses in Ikoyi whose rents were more than N3.5 million per annum.
Housing deficit or unaffordability
We really have housing deficit. It is an old story but it is real. The issue of available houses not being affordable is a matter of who want the houses ? As far as I know, there is no empty house anywhere or one that is lying idle because nobody can pay for it. It is not a question of affordability but about the quantity that is available. Over the last ten years, no single house has been built by the government. FESTAC was built in the 70s. There has been no housing renewal ever since and all we have had is decay in infrastructure and other facilities.
Expectations in 2008
I expect there will be improved effort on the part of all the operators which include the government, the players and the consumers. It is a long list, including all those in the value chain.
I see in the new year a situation where there will be a housing co-operative approach to home-ownership. There will also be homeowners association and government will fastract its policy intervention that will encourage homeownership to the extent that citizens will begin to have a sense of commitment or stake in the country.
In other countries of the world where mortgage culture is strong, you hardly hear that people burn houses because they have a stake in them.
If there is a riot in private estates, for instance, houses are hardly burnt because residents have a stake. The culture of home maintenance will be there because if the house is taken on mortgage for 10-20 years, the value of the house has to be maintained throughout this period.
Factors that will derive real estate market in 2008
The factors that will derive real estate market this year will be a combination of political and economic factors because I think none can survive on its own. You can’t have a vibrant polity without a stable economy and there can’t be a vibrant economy unless there is a peaceful political terrain. I hope there will be government policies that will lead to the growth of the economy and that growth will drive the need for housing development.
I see expansion of housing development into the hinterland and a deliberate effort by the government to decongest the cities and urban areas; there will be effort to arrest the rural urban drift and the financial institutions will be more generous in their consumer lending which includes mortgage finance.
I also foresee a bullish action in estate development. Because the economy is becoming more and more stable and strong, there will be economic empowerment in terms of employment generation.
I also see a changing trend in inflationary rate. If inflation is not pushed down further, it will maintain a single digit rate. There will be stability, if not appreciation, in the value of the naira. All these are on the economic side.
Politically, more people will get involved in governance because the stake is becoming higher with the rule of law in place. By this, more people will be empowered economically, leading to increased investment in performing sectors of the economy.
In the new year 2008, the real estate market will be a gold mine for investors.
Operators in the sector should do all that is necessary to ensure they take the industry beyond where it is to where its peers are. This will involve capacity building, best practices and ethical standards in operation. It must be creative, innovative and ready to face the challenges known to us. We must get out of the box because we are facing so many challenges that are known to us. We must do all the things that are required from us as operators
Banks’ enhanced capital base and housing finance
How the banks’ enhanced capital base will affect the real estate sector or any other sector for that matter depends on what those banks want to do with the funds available to them.
There is no forcing them to do something with their money because they are into business. If they see good returns in real estate business, they will definitely put their money there. If they see better returns in maritime or oil and gas, they will put their money there.
The real estate sector is just one little aspect of the totality of where they could apply their money. The difference is that the real estate sector is a long term thing, a long term race, but in the other sectors, you can have a short term vision.
I don’t always understand what people mean when they say that mortgage institutions do not perform up to expectation. I want to draw attention to what really determines the success of any banking institution. There are many parameters that determine the health of any bank and central to these parameters is management. The liquidity of any bank is a direct consequence of what management does with the funds available to it. The earning, of course, depends on the kind of investment that the management does.
What will lead to increase in housing stock is demand. If there is strong demand which will come from empowerment, people will want to own houses and if this is the case, banks will be encouraged to give loans to estate developers. So, the area the banks will put their money depends on where there is high return on investment.
Add to:
del.icio.us |
Digg
del.icio.us |
Digg
Email to a friend
Print version
Plain text
Comments ( posted):
Post your comment