Coronavirus in Nigeria: what are the odds for real estate?

Coronavirus Sigh…
Looks like one of the most dreaded things is upon us.

Hopes that the coronavirus would be contained to China have vanished as the first case in sub-Saharan Africa was announced in Nigeria and stock markets took a pounding amid fears of a global recession.
Nigeria’s first confirmed case was not detected at airport, and travelled through Lagos before he became ill and went to a hospital, the country’s health minister said. The Italian man, who authorities said arrived in Nigeria from Milan on the evening of February 24, did not have symptoms when the plane landed.

Even though intrinsic details are sketchy at this point and the carrier is said to be relatively stable, the worry continues for how this will impart the real estate sector, as well as public health concerns with spread and transmission.

Will demand for real estate investments drop or be impacted by coronavirus? To what extent will the impact felt by the Nigerian economy hit the real estate sector? How will this continually affect import prices of construction, site and home finishing, fixtures, and sanitary ware?

It’s been over 10 weeks since the first case of Corona Virus was announced in Wuhan, China and concerns around the virus have evolved from that of the health of the global population but also the health of its capital markets.

It is imperative, however to create background and context on the pricing mechanism for real estate and how it varies from other asset classes

While the pricing apparatus for assets like equities and bonds are transaction/market-based, real estate assets have a pricing mechanism that is appraisal based. The distinctive feature for publicly traded equities or stocks is that can be bought in small units, they are transacted, traded and change ownership in large volumes (often multiple times daily),and this makes it easy for variations in market sentiment and confidence to echo in pricing very quickly.

Property however is strikingly different. Value assigning is set by a valuer as transaction volumes are not as frequent due to its indivisible nature and high price. Appraisal methods typically involve valuers using historical appraisals or valuations and in other cases comparable properties with values which were arrived at in previous periods that had different economic backdrops. As a result, property prices do not always respond to the changes in prospects about the economic environment as swiftly as they ideally should.

Still, historic data has proven that prolonged periods of depressed oil prices will not just affect the Nigerian economy, but also affect the Nigerian real estate market.
More-so, the construction industry in Nigeria does have some important ties to China. Many property developers and vendors source for sanitary ware, doors, HVAC and many other fixtures and fittings from China and changes i3n the business environment there may affect the affect speed and pricing, especially if buyers are driven to other potentially more expensive markets.

It’s only a matter of time before we begin to see the practical play out of how the development of events directly or latently impact the real estate market whether in terms of supply and demand, especially for the hospitality industry, and how most likely investors react to the development if heavens forbid, the spread of the virus becomes vast(this is not our hope).