REAL ESTATE PRICES IN ABUJA SET TO REBOUND WITH OIL PRICES IN 2021
The Nigerian real estate industry and the wider economy are heavily dependent on international oil prices and foreign exchange earnings, generated from the sale of Nigerian crude oil. Foreign exchange earnings, generated from oil sales, account for approximately 95% percent of Nigeria’s foreign exchange revenue (excluding remittances from the Diaspora) and 80% of the Government’s annual fiscal budget . Moody’s the world renown, international ratings agency, in May 2020 predicted that average monthly oil prices are likely to double to over $50 dollars per barrel in 2021. In detail, oil prices per barrel (Brent) were $63 in January 2020, $18 in April 2020 and $25 (so far) in May 2020. A comparison between 2020 oil prices and Moody’s prediction of a $50 plus per barrel oil price in 2021 suggests a U’ shaped oil price recovery curve for the year 2020/21. Consequently, at the macroeconomic level, Nigeria’s foreign exchange earnings (which are oil price dependent), the interrelated Nigerian economy and real estate industry are expected to rebound, in unison in 2021 [3a][3b].
*Real GDP growth will slide into negative territory (-1.6%) in 2020
*Before Revovering in 2021 on success of efforts to contain the virus
At the microeconomic level, the average price for a 5 bed house in Lugbe, Abuja in August 2019 was £113,000 then rose to £228,000 in February 2020 before slumping to £115,000 after Covid-19 hit in March 2020, according to an independent national real estate agency . There are approximately 200 research projects searching for a Covid-19 vaccine – the most promising of which, in Oxford U.K., began clinical human trials in April 2020 . Assuming a Covid-19 vaccine is found and mass produced, within the year, then expect 5 bedroom house prices in Lugbe Abuja to rebound as sharply as they fell in March 2020. It is worth noting that the Lugbe district of Abuja was ranked the third most popular real estate investment destination in Abuja in 2019/20, out of field of 60 alternative locations in Abuja . In conclusion, both macro and micro- economic drivers, outlined above, suggest that Nigerian real estate prices are set to rebound in 2021 especially in Lugbe, Abuja.
Author: Dr Adrian Ogun,MD, Adriano Properties housing estate, along Airport Road, Lugbe Abuja.
(5) https://www.nytimes.com/2020/04/27/world/europe/coronavirus-vaccine-update-oxford.html(6) https://nigeriapropertycentre.com/market-trends/demand-trends/abuja