In contrast to the 5-year negative trend, the Real Estate sector closed the year 2021 positive, recording a 2.26% GDP growth, in line with our positive expectations as highlighted in our 2022 outlook “In Dribs and Drabs”. The GDP performance measures the health of companies offering real estate services, as the National Bureau of Statistics (NBS) tracks the tax returns of these firms to measure growth. Similarly, related sectors such as the construction (+3.09% in 2021) and cement sectors (+6.64% in 2021) also took a bow from the harsh effects of the pandemic in 2020.
While the GDP performance possibly does not capture the extent of real estate investments, It is enthralling to see that despite the serious absence of purchasing ability, investments in real estate defied the odds, even as reports from a notable real estate advisory firm, Estate Intel, noted that real estate projects in Lagos (one of the largest real estate markets in Nigeria) under construction increased by 19% in 2021. However, some subsectors such as the residential and healthcare have recovered more than others (Office, Hospitality). Apart from that, the cement players also highlighted the dominance of private sector investments in their performance, particularly in H1 2021 amidst elevated cement prices, especially at the retail end. Also, we believe a part of the net OMO repayments of c.N4.6tn in 2021 went into real estate investments.
In our view, the real estate sector is back from the brink but not completely out of the woods. A total GDP growth of 3.4% in 2021 ahead of population growth of 3.0%, suggests improved consumer spending. Going into 2022, we believe the narrative on real estate investments will not be far from what was witnessed in 2021 as part of the increased projects under construction in 2021 will be completed in the year, ultimately expanding real estate consumption. Also, 2022 is a pre-election year that historically is characterized by the completion of abandoned projects and investments in new ones to appease the electorate. However, despite the positive outlook in 2022, we believe the weak disposable income, the waned impact of base effects, will cap growth.
Source : Proshare
