The Election Effect: Myth or Reality?
The Election Effect: Myth or Reality?
Real estate practitioners are preparing for a bumper year. Why? Is it the Election Effect? They say the year before an election year always triggers a lot of transactions in the real estate market. They base this on two major factors:
Politicians looking to raise funds for campaigns will put up their properties for sale. These properties would ordinarily and normally not be on the market. As committed sellers, they are not bound by the usual dictates of the real estate market. So, the asking price of their property will be lower than the market value. The result will be more properties on the market and this may affect prices.
This is the second assumption. The suggestion here is that there will be a lot of spending on election campaigns; mobilization of delegates, publicity, commissioning of projects by those in power etc. This ‘spending’ will, in turn, trickle down into the hands of Nigerians who will then spend more on property.
Is the “election effect” a Myth or Reality?
Castles Lifestyle decided to gather the views of expert and experienced Real Estate Practitioners in order to provide more insight into how the 2019 election activities in Nigeria will affect the real estate market after INEC released the timetable.
Mr Kolawole Anunopo:
There is every likelihood that there will be more activities in the real estate sector this year. Those with political ambitions for next year’s election are already exploring different avenues to raise campaign funds. One of the avenues is the real estate market. At the moment, properties have been placed on the market for quick sale. In fact, a client of mine who wants to contest for a political office in his State has instructed me to sell one of his properties as soon as possible. The request for a quick sale of the property is borne purely out of his need for bulk funds to support his campaign.
Another reason to expect more transaction in the real sector this year is Government activities. The incumbent Government will be looking to do more towards fulfilling past promises and completing unfinished projects. Executing these projects will require that government release more funds into the system. As such, when the economy has more money in circulation, people will have more funds to buy real estate, lease or rent apartments.
Mr. Kolawole Anunopo is a well-respected and highly experienced real-estate practitioner. He is also the CEO of Integrated Estate Services LTD.
Dr Rotimi Idowu:
It’s a fact that during preparation for elections, several people, to avoid lending from banks, will place their property in the market. It goes without saying that elections in Nigeria are extremely monetized. You need a lot of money to contest for elective positions and posts. In this regard, a lot of new properties will join the ones we presently have on ground in the market thereby creating a glut. Whether those properties sell fast depends on the type of property and level of demand. Without a doubt, additional supply of properties by committed sellers to the existing pile will affect property price.
As a nation, Nigeria suffers a lot of CAPITAL FLIGHT. Politicians make a lot of money from the system (either through international contracts or outright lifting of funds in the country) and then take these monies abroad. However, during preparation for elections, there will be repatriation of such funds back into the country and the economy. These funds will eventually trickle down into the hands of those in charge of their campaign affairs. With more money in the hands of campaign officers, directors etc. there is a high chance that they would go on and purchase a property they might have been putting off prior to that time.
At the end of the day, the people seeking elective positions will not be as much as those who will benefit from the spending. For example, where a high grade property is in question, whether somebody seeking elective position is able to sell his property or not, he will look for other ways to get funds. So, it’s going to be a Win-Win situation. In this case, those in the property market will benefit positively from the preparation and inevitable spending associated with election preparations.
Dr. Rotimi Idowu is the CEO of Rotimi Idowu Idowu & Co Estate Surveyors and Valuers. He is a highly versatile and knowledgeable real estate practitioner with over 30 years of experience.
Mr Oyeme Silas:
In the year preceding an election, people are usually unwilling to spend money. They would rather wait until after the election outcome before deciding to spend or not. A lot of properties will be on the market by people in need of cash. However, it is one thing to supply a property and it’s another to get a buyer for the property. It will probably lead to a situation where prices of some properties will be ridiculously cheap but the question is if people will be willing to part with their money to buy such properties.
While money from government projects and co will definitely trickle down, not a lot of people will be willing to spend their money on properties immediately. Some of them will want to keep the money and see how the political system plays out. Some people will also decide to use the money for other things.
True, there are clients who are ready to buy properties with the money they’ve realized from the election. However, before election, most of them will be unwilling to spend on properties, preferring to adopt a wait-and-see stance. In fact, when advised to buy a property because it is very cheap now, they would maintain their stance. This cautiousness is attributed to their uncertainty regarding the election outcome.
Those who are confident about the chances of their candidate in the election, might be less averse to spending on property. Because, once their candidate wins, it means more money and opportunity to purchase properties. On the other hand, those who feel less confident about their chances will rather wait to see what happens after the whole electioneering process is completed before making real estate decisions.
Furthermore, most of them will be only be willing to make investment property transactions. They would rather purchase blocks of flats that they can rent out or office spaces for lease.
While politicians will not buy properties pre-election, they will most certainly take out rents and lease properties for use as campaign offices, headquarters and mobilization base.
More Movement in the First Quarter
In the first quarter of this year, there will be transaction because those in the public and private sector will want to buy properties. So, the property business will move between now and the end of march. After the end of march, everybody will divert attention towards the election resulting in slow property purchases. Nonetheless, short-lettings and leasing are expected to flourish.
Mr Oyeme Silas is the CEO of Oyeme Silas & Co. (Solicitors).