Real Estate Sector Reform Will Help Boost Economic Growth and Alleviate Poverty in Nigeria, Says PwC Chief Economist

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Reforms in Nigeria’s housing and property market will drive economic growth and help alleviate poverty, an expert from PricewaterhouseCoopers (PwC) has said.

As one of the keynote speakers at the 4th annual West Africa Property Investment (WAPI) Summit, Dr. Andrew Nevin, Partner and Chief Economist for PwC Nigeria shared high level insights ahead of the region’s leading property investment conference taking place on 15th and the 16th of November, 2018 in Lagos. Featuring more than 90 speakers and 500 delegates from over 200 companies, WAPI 2018 will set the agenda for West Africa’s real estate’s executives.

As a respected regional and global authority on Nigeria and West Africa, Dr. Nevin’s presentation is titled: ‘The Global View on Geopolitics, Oil & Macro-Economics: How are these impacting investment in West African Real Estate?’

In an increasingly volatile world emerging markets have been significantly impacted. Dr. Nevin, aims to advise executives answer on how volatility, government policy and oil will impact investment and development in Nigeria.

Dr. Nevin, who happens to be a Partner, Chief Economist and Advisory Leader for PwC Nigeria, with almost 30 years’ professional experience, having lived in Asia, North America, and Europe, believes that Real Estate is fundamental to growing an economy.

Real estate makes up 60% of the world’s global assets and in developed countries, real estate buttresses the financial sector, enabling for the creation of asset backed loans and securities. Nigeria’s real estate system cannot work without a proper land registry, and banks cannot lend against a property without evidence of ownership.

Nonetheless, foreign exchange and inflation have stabilized in Nigeria amid emerging market pressures. However, crude reliance continues to leave Nigeria vulnerable to external shocks. This creates persistent uncertainty for investors in Nigeria, which is affecting all sectors in the economy, including real estate.

In urban areas, commercial real estate occupancy has declined as a result of low demand in an underperforming economy. Consequently, office rent has declined by 20% over the last 3 years in the high-end market, while co-working spaces are becoming more popular, consistent with the growing number of tech start-ups and entrepreneurs.

“In the premium residential market, demand has shifted to less expensive semi-detached houses and apartments. There is also persistently huge demand for affordable housing in Nigeria. Nigeria’s population is set to exceed 250 million people by 2030, and by 2025, our housing deficit will be approximately 20 million. We are not building enough houses for people to live in,” Dr. Nevin explained.

Dr. Nevin’s research indicates that the real estate sector has not seen positive growth since the start of the recession in 2016. The sector continues to lag behind overall growth, recording a growth rate of -3.88% in the second quarter 2018. Nevertheless, this is an improvement from the -9.4% growth of the preceding quarter.

PwC research shows that heavy government borrowing has crowded out the private sector, making it difficult for investors to finance the capital-intensive projects of the real estate sector. This issue reinforces the need for the government to undertake structural reforms that will improve capital stock and business environment.

“In the absence of sweeping structural reforms, Nigeria will continue to experience slow growth through 2022. The critical takeaway here is that income per capita will decline each year over the next five years as population growth exceeds GDP growth, if no action is taken. Investor confidence will be largely determined by the elections and the ongoing security situation in Nigeria,” Dr. Nevin concluded.

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