…An eye opener for every stakeholder in residential and commercial properties.
“Investing in real estate will not only benefit your finances but will also help to fortify the economic and social fabric since it normally involve other economic sectors”
Economic uncertainty seems to be increasing at the same rate as COVID-19 spread like Wi-Fi with the existence of fear and possible recession, including general flagging of the global economy. However, there is no need to panic. In times of uncertainty, it is advisable to look for alternatives to protect your liquidity/investments, and even try to earn the best possible profit. The stock market and real estate are generally two of the most viable options to invest; therefore, you should recognize the risks and the levels of profitability of each one to make while availing yourself a consistent decision regarding to your needs.
Real Estate Perspective of the Recession: high long-term profitability
Contrary to investments in the stock market, investing in real estate represents a lower risk and a higher level of stability. The financial return on investment in real estate is highly profitable and safe. Moreover, in some cases, the results of that investment will not be reflected instantly; rather they represent a safe long-term investment. In cases of economic uncertainty such as the one the world is currently experiencing; a real estate could mean a possible source of extra income or a guarantee for your business. Everything depends on the type of real estate you invest your money and your objectives.
You can contact us at AAA or send us email via adenijiadele.valuers@gmail.com for topnotch decision making over your real estate asset or type of property to invest in.
In real estate, the investment opportunities are diverse and each one offers different results. In consequence, you diversify your money and you will be prepared for sudden economic changes. Another important element is the capital gain, the increasing value that your property acquires over time and how it helps to increase the possibilities of your investment. Investing in real estate will not only benefit your finances but will also help to fortify the economic and social fabric since it normally involve other economic sectors.
Given the extraordinary global circumstances, many investors now fear that another recession is afoot. It makes sense, as recessions are often the result of an abrupt drop in spending, although most causes of recessions cannot be predicted in advance.
Investing in real estate as a BEST OPTION
Though, a major recession can bring serious loses to some industries, real estate — provided wise investments are made — is usually not among them. Recession usually leads to a drop in home values, meaning that you may be able to buy a property at a lower price and sell it for a large profit when prices rise, back up after the economy and markets have recovered.
In the meantime, you can rent the property out to a tenant, generating reliable passive income during the interim period. You can as well contact us at AAA to equip you in all you need to know which is part of our obligation, as real estate consulting firm in protecting our clients in Nigeria and diaspora against recession. My thoughts on the property market are based on the assumption that this is a pandemic with a foreseeable end in the coming months.
Residential Property Market
We expect landlords of rental properties to maintain current rentals while negotiations on rental payments in installments with the guidance of real estate professionals will become common. Tenants will need some time to recover from the downtime and quarterly or semi-annual payments would give them some comfort while providing predictable and regular streams of income for landlords. This will also put pressures on property management professionals who would have to manage the foreseeable fluctuations in payment from tenants.
Commercial Property Market
This will also see landlords/investors retaining rents at their current rates while tenants who have not been gravely affected by the crisis such as E-Commerce, ICT, Personal and Health care, Food processing & Retail, Medical supply & services , will continue to meet their obligations. There could be the need to downsize office sizes as internal financial positions are reviewed. We however expect limited interest from foreign companies looking to start business in Nigeria. They are expected to minimize expansion plans for now while they consolidate their positions.
Co-working offices should see demand return. Though we have all learnt to become more productive with working from home and have created routines similar to the office including shared task applications and video conferencing, the need for human contact cannot be denied and this would make co-working offices that already provide the flexibility remain attractive.
The retail business have been severely impacted as their business model is based on high turnover and efficiently managing their inventory. The businesses who are able to come through this difficult time could be the greatest winners of all. Properties used for events, fast food businesses, bars and restaurants should recover very quickly as people yearn for outdoor entertainment when the movement restrictions have been suspended.
However, foreign and local travel restrictions would linger on for a while, even after normalcy begins to return. This means hotels and other players in the hospitality sector who earn daily rates would still be feeling the impact, especially when their clients are not local.
Property purchases will decline in the coming months as individuals and companies take stock of their positions after the crisis. Developers who are well advanced in their projects will experience a lull period while they remobilize back to site and depending on the details of individual contracts, reviews may become unavoidable. This also implies extended delivery dates in conjunction with increasing construction costs due to the Naira devaluation. Developers who have not begun their projects would need to review their plans and funding strategies as banks and other financial institutions would review their lending decisions. Residential developers with committed homebuyers would need to lengthen the payment plans while innovative marketing strategies including price discounts to attract new buyers are expected.
One of the major lessons learnt during this crisis is the need to be more self-sufficient with our food and local production. Increased demand for rural land around good road networks for farming, storage and production are expected. In general, revaluation of various assets would be necessary while new valuations would be based on how quickly the commercial banks are able to bounce back from the crisis. The COVID-19 pandemic would leave a lot of people to reflect the way forward after. There will be individuals and companies who would resume their businesses and operations with a sense of new beginnings and opportunities. Real estate remains a good store of wealth and purchases at good prices would still continue. Adeniji Adele and Associates offers a range of professional services to meet new and existing client needs during this time and beyond. Contact our professionals for advice and guidance.
The reality remains that the Nigeria’s manufacturing, retail, and banking sectors face structural problems that Government struggle to fix i.e Electricity shortages & proposed hike in tariff postponed till later in 2020 will stunt the maturation of the manufacturing and industrial space in Nigeria.
Ajikobi Alex Alhasain, Writes from Lagos.
Real Estate Consultant
+2348135513932
@ Adeniji Adele and Associates
Adviser on International Property in UK, Europe,
USA, Canada & RSA
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Alex Ajikobi