Finding Balance in Real Estate Investment

The nexus between the economy and the real estate industry can never be overemphasized. With a crash in crude oil prices, a falling exchange rate, increasing interest rate, and a continuous rise in inflation, real estate doesn’t seem like the right industry to expect an ROI in this period.

Largely driven by the implementation of the VAT rate and border closure, the inflation rate in Nigeria is currently recorded at 12.26%. Compared to April 2019 (which stood at 11.37%), the current figure is the highest since April 2018. It doesn’t seem to get better, as an upward progression has been maintained since August 2019, which stood at 11.02%.

On the other hand, interest rates might just motivate prospective investors in Nigeria but the rates are not entirely beneficial as well. During its March 2020 meeting, the CBN maintained the interest rate at 13.5%. The decision was driven by an attempt to support the economy during the Coronavirus outbreak. 

Are There Promises in Investment Classes?

Experts speculate that the world will live in a new reality after the pandemic. There will be changes in the way we live, work and play. Real estate plays a big role in these three aspects of our lives. This also will make some real estate products more attractive to invest in especially in developing economies, like Nigeria.

A big chunk of the real estate industry is driven by demand and supply. The investment class chosen is determined by the demand and supply gap. 

While commercial real estate and other real estate factions are experiencing a huge decline, there are a few opportunities that can be explored during the post-COVID era;

 

• Residential real estate

This is an obvious investment opportunity. Regardless of a pandemic, people will always need a roof over their heads. 

According to feedback from real estate agents on our platform, individuals are still on the lookout for apartments and a number of them will be set to move once the lockdown is relaxed. As a real estate agent or property owner, we advise that you don’t take down any property that was on the market prior to the lockdown. Families are expanding, in order to adapt to the possible work-from-home system after the pandemic, people will need more space for and home office and general comfort.

If you currently have the required resources, this is a great time to invest in rental apartments and also promote available properties on the market. Compared to the sales market, the rental market unarguably holds the biggest share in the real estate industry. There’s never really a bad time to dedicate resources to the rental market.

In addition, there’s a growing opportunity in youth housing in Nigeria. In a bid to achieve privacy, a new class of young remote workers might be on the look-out for studio and one-bedroom apartments. 

 

• Land

Prior to the lockdown, landed properties located in nascent locations have been on the market. Apart from buying distressed properties, it’s not out of place to purchase lands in areas exhibiting signs of future potentials during and after the pandemic. A major perk attached to land investment in the right location is the fact that it appreciates overtime. Considering these uncertain times, you can choose to hit pause on building plans and if your interest changes, there’s an opportunity of re-selling.

 

• Logistics 

The unrelenting spread of the virus has prompted people to utilize online purchasing platforms from the comfort of their homes. Clearly, logistics and warehousing are taking a new turn. More than ever, groceries and other essential commodities are ordered online and even after the pandemic, online shopping for groceries and household items will continue to surge due to a regained trust of online ordering and the convenience that comes with it. With the expected surge in online orders there will be an increased demand for storage and warehousing. Warehouse increased demand makes it a good investment.

 

• Invest in the property aspect of the health sector

The Coronavirus has exposed a wide margin between the essential and non-essential workers. Especially in Nigeria, the string of deficiencies in the health sector has been unmasked.  Investors can keenly seek opportunities in healthcare real estate needs. The goal is to invest in modern residential health care facilities, renovate, and revamp existing buildings. This will definitely give high returns

Considering the return metrics capital producers have to meet, we understand that they cannot afford to be sympathetic in this period. To avoid bad investment choices, consult a competent lawyer, and find reliable investors who share similar revenue interest with you. Finally, take the time to study the intricacies of each investment class before taking the plunge.