Is It still Bad Or Getting Better?
Posted by Debo on June 25th, 2009
This is a question about the economic weather as regards the real estate climate. At the beginning of the melt down, it looked like Nigeria and most importantly the real estate sector will be insulated. But alas, the hurricane soon caught up with us. Now, it is very clear to every practitioner in the field that there is something call recession or economic crisis.
Every sign necessary to confirm such have shown up; properties on sale are staying on the shop floor for much longer than the average 3months. The length of time it stays in the market depends on which end of the market it belongs. Prices have crashed from about 10% – 30% at the highest end of the market.
A smart young lady had a question for me within the week. She wanted to know whether the real estate market has bottomed down and if more price descend is to be expected, what is our survival strategy? The question reflects the concern most watchers and my response was very simple. In a nutshell, we have divided the market into three and have designed different approach for each of them. We are not going out of our way to look for sales or letting briefs that must be executed in the now at the upper end of the market. We are more serious with letting in the middle market while both sales and letting are still very much on our radar for the lower end of the market. Of course, a lot of things went into arriving here; research, statistics and our experience. And I think it is working for us.
Talking about experience, I have a letter on my table now asking for the balance on one of our investment properties that could pass for upper-middle class type when the economy was normal. We didn’t want to get to this stage and have put the property up for sale since about 7-8months before now. We are yet to close any offer till date. Most of the demands have not been effective because prospects could not access loan.
However, in all of these, i believe we are nearing the end. Why I say so is because things have started picking up on a consistent basis from one of the sectors the effect was first observed. I looked up the current price of FBN share this week to discover that it is now N23+. I am aware that in the heat of the crisis a couple of weeks back FBN sold N17+. An appreciation of almost 30% in weeks and a general appreciation of the value of the shares on the floor of the Exchange to me is a very good omen that things are settling.
Our experience and my thinking informs that while other sectors of the economy could have reached the bottom and now on their way up, the real estate sector and especially the high end of the market will still sag a little before it starts to rebound. We may be talking of a couple of months here, say 2 – 6months. There will be a little stagnation somewhere within the upper end of the middle segment of the economy while the lower end will be impacted directly by what happens in the other sectors of the economy. The world is a cycle, so also are the happening within it. Real estate was one of the very last to be hit and would have be one of the very last to regain consciousness.
So, I summit, it is bad, may be evening getting a little worse so that it can get better soon enough. Be wise, discern the times.
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