How coronavirus impacts buyers in real estate market
Notwithstanding the positive outlook for the Nigerian property market in 2020, the COVID-19 pandemic has impacted negatively on the market, leaving property investments in disarray. With the disruption, home buyers are still hesitant to buy. For them, the period was not ripe to invest as they don’t know how long the pandemic will last and are adopting a survival strategy.
According to survey by Forbes, 81 per cent of respondents confirmed that the Coronavirus has an adverse effect on the number of prospective homebuyers in America. Also the study said the property purchasing rate in Nigeria drastically reduced by 80 per cent. As the lockdown keeps escalating and another 54 per cent of respondents reported difficulties in getting building materials for homes.
Overall, there’s no denying that it will take some time to see just how severely this virus will impact buyers. However, the study sees a glimmer of hope as though, buyers are being cautious, the drive to own a home was still alive and well.
With the gradual ease of the coronavirus lockdown, some homebuyers and real estate players are capitalizing on the low prices to make purchases . For instance, some properties at Pakuro and Ijere Worugudu in Mowe area of Ogun states, which have been idling away for years, were sold last week.
The building comprises, in three uncompleted blocks of five flats and four bedrooms bungalow. Each block sits on a one and half plot. The transaction is based on the easing of the lockdown, which has impacted negatively to the real estate sector.
One of the buyers, Mr. Endurance Ogbile said, he was encouraged to venture to the property because of the easing of the lockdown and the relatively low cost of the property.
According to him, he has been negotiating on the property since December but seized the opportunity provided by the uncertainty brought about by COVID 19.
The owner of the property has insisted on a particular price but I declined because I was waiting to see what becomes of the situation until, the relaxation of the lockdown. When he called again, I decided to close the deal even the agent collected only 2.5 percent rather than the 5 percent he was haggling on.
Similarly, Mr. Okechukwu Adibe, who bought the bungalow at Orilegun, Off Magun road, said he was encouraged by the low price and the gradual easing of the lockdown.
He stressed that he had suspended any kind of investment before the easing of the lockdown. Adibe, who has already fenced the property for further development, said he intend to preserve the property for future sale post COVID 19.
Speaking on this, chairman, Nigerian Institute of Estate Surveyors and Valuers (NIESV), Lagos Branch, Mr. Dotun Bamigbola, said no one is denying that the spread of coronavirus has had a profound impact on buyer confidence in the real estate industry. He stressed that the impact of COVID-19 on real estate buyers has been mixed.
According to him, cash is now king in the economy and buyers who want to go for distressed properties or properties of distressed owners or mortgage foreclosure will have a swell time, on outright purchases.
But Bamigbola said, with some new residential developments coming up at stable pricing in relation to pre-COVID period, some buyers are taking advantage of such stability. This happens mostly on off-plan sales.
“So, generally prices of real estate assets are not fast dropping in prices but stable or mildly lower, based on the type of assets. For Grade A commercial leasing, the USD rate is also giving way gradually to Naira rates. Office spaces for various organisations are also shrinking due to remote working and cost cutting or budget re-alignment”, he said.
Stressing on the impact of the extension of the lock down, Bamigbola said the real estate business was very low during the total lockdown in some states.
Physical inspection by buyers and lessees, he said, is a critical decision making process in the real estate market and the lockdown denied a lot of such inspection activities, particularly in the major real estate hubs like Lagos and Abuja.
He further said the need to also maintain social and physical distancing on sites during inspections has its own impact on the willingness of buyers in visiting locations at the moment, during the relaxed lockdown period.
“Indeed the inspection protocol has to change as practitioners have to embrace the new norm of ensuring wearing of facemask and providing hand sanitizers on sites.
These regulations make it necessary for us to change our way of living and working, which has been a challenge for some. So, rather than visit, some buyers may stay away. However, we must understand that the COVID-19 safety regulations will have to be managed by all and sundry for a long time, so life and business must keep going on as we all cope with the situation”, he added.
Also, chairman, Ogun State Branch of NIESV, Saliman Shobanke said COVID 19 has impacted negatively on the real estate market, especially in Abuja, Lagos and Ogun States.
He said in Ogun State, there was a lot of property in the market but there was no buyers even at very cheap prices because the money was not there and those who have the money are afraid to spend them preferring to stay and look.
In Ogun, we are doing one day on and one day off , in the past three weeks, it did not allow for seamless operation in real estate sector.
“In Abeokuta, there has not been many transactions, I have only done two transactions this year and that was earlier in the year. With the extension of the lockdown, he said, extinguished the glimmer of hope.
According to him, when the curve was not flattened, people are still not certain; people that have the money have to think twice before investment, the extension has really exacerbated the situation. For the chairman of Osun State Chapter of NIESV, Fasiku Olusegun, no one will require a crystal ball to predict the shape of the economy and businesses by the end of COVID 19 lock down.
According to him, it is expected that real estate sector would bounce back as it has done in the past. This come back, he said might however not be sudden but gradual.
The impact may lead to investment diversification and this may result in more landed properties being put up for sale in the market.
He stressed that one thing that is certain is that more of such properties will be placed in the market and valuation briefs will be put out and sales brief can be secured.
Larger chains that are more solvent, Olusegun said, will also be looking to expand into the new markets; this select group can be targeted for the secured sales briefs.
According to him, there is certainly going to be a demand and a supply upswing , so the market will remain active. Distressed sales may be in the increase and maybe a good time to buy.
“It is the time to buy and firms may well package some suitable sale properties that are income-generating in nature for prospective clients. Investors may want to take advantage of this to buy up one or two properties with the aim of putting them back in the market in a couple of months”, he said.
He further stressed that the two major parts of estate surveyors and valuers, the extension of the lockdown will hit most are the aspects of property sales and property management .
According to him, even before Covid 19, there has been an unusual long time glut. Another area that is mostly bounce back is property valuation from the third quarter of 2020 and after if the curve of the virus spread is flattened any time soon. Olusegun also saw a glimmer of hope for estate surveyors and valuers because at the end of COVID 19, there will be need for property valuation in all ramifications, which is the exclusive preserve of estate surveyors and valuers.