“The vacancy period is also increasing on a daily basis which has also resulted into loss of income to many investors. This was self-evident in the decline of demand for rate for some properties especially in the upscale markets in Lagos”
By Alex Ajikobi, January 9, 2019, article
It is very dreadful and frightening that the world economic meltdown is showing no sign of easing off. Unfortunately, the United States of America which is the biggest economy in the world and the biggest consumer of oil, is witnessing a backsliding drop in demand, because of the financial meltdown and this has seriously affected the circulation of fund for investing in many sectors most especially in REAL ESTATE , which has the highest yield (s) among other investment. Indeed, this may just be the thinking of many investors, but it only takes crackerjacks in real estate sector to see this meltdown as the greatest period to optimize maximum return on landed properties.
The risk of global economic downtown has heightened significantly and volatility of commodity prices, which is the pillar of most developing countries like Nigeria, has increased further. If this situation continues to deteriorate, developing countries could be in great jeopardy and this will seriously affect all the stakeholders in the built industry.
It is clear that the global meltdown presents significant challenges in Nigeria as at of today. Apart from exposing the functioning of the global economy which leads to a call for global financial architecture, it has also caused a collapse in the value of real estate assets and professional services delivery.
These challenges are seriously impeding on economic growth, which has seriously damaged the attractiveness to both prospective and existing investors locally and in diaspora. The vacancy period is also increasing on a daily basis which has also resulted into loss of income to many investors. This was self-evident in the decline of demand for rate for some properties especially in the upscale markets in Lagos (Ikoyi, Lekki, Ikeja and so on) and Abuja.
It could be recalled that Nigeria entered recession in the 3rd Quarter of 2016. Generally, when a country is in recession, there is scarcity in the flow of money in the economy resulting in low spending which is what Nigeria is passing through presently. Many landlords cry of NO MONEY because many tenants are unable to pay even the Blue-chips company are now minimizing their cost on accommodation, likewise investor. Sadly, the cost of getting a buyer now is more expensive than before. Thus, the global meltdown is virtually affecting all major stakeholders in the industry. However, the question before us today are, how many people can pay for what you can offer, how accessible are you to people who can afford you, how affordable it is to locate those who can afford you. That is puzzle before us.
Furtherance to the above, when economy is shrinking, unemployment rate will increase, businesses and families will not be able to get credit loan and many companies can’t secure loan because of the high interest rate.
As we know IT industries, financial sectors, real estate owners, car dealers, investment banking and other industries as well are facing heavy loss due to the fall-down of global economy. Meanwhile, my recommendations on the effect of the global meltdown on real estate and property market are but not limited to the followings;
Tax cuts are generally the first step any government takes during slump to cushion the effect on the masses, business leaders need to change their business models if they are to maintain strong brands. One of the major strategies required is excellent service culture, the government should continue to embark on welfare economy for the benefit of both the rich and poor to cushion the effect of economic meltdown, all abandon government assets should be put in proper use (Long lease with private company, redevelop and sell) or Public – Private Partnership arrangement on the use of asset, governments at all levels must deploy the available resources appropriately to solve people’s needs rather than using the resources for political settlements, government should hike its spending to create more jobs and boost the manufacturing sectors in the country, Government should try to increase the export against the initial export, the way out for builders is to reduce the unrealistic prices of property to bring back the buyers into the market. And thus, raise finances for the incomplete projects that they are developing, the falling rupees against the dollar will bring a boost in the export industry and boost local product images.
The Nigerian government should find alternative ways to fund their budget deficit so as to reduce the pressure of financing projects in the real sector of Nigerian Economy by banks. We have a long way to go but with believing mind-set among the professionals and government, we can get to where we supposed to be within limited time.
Alhasain, Alex Ajikobi. Is Real Estate Consultant., firstname.lastname@example.org
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