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Economic Uncertainty Filters Into Lagos House Prices

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  • Economic Uncertainty Filters Into Lagos House Prices

As the Nigerian economy continues to suffer one of its worst recessions in recent history, transaction in the Lagos real estate sector remain slow last year culminating in either house price falls or a rapid deceleration of house price rises.

According to the Nigeria Bureau of Statistics (NBS), the Gross Domestic Product (GDP) recorded negative growth in the first two quarters of the year at -0.36 per cent (q1) and -2.06 per cent (q2) respectively and by the third quarter GDP had fallen by -2.24 per cent.

In the latest Lagos House Price Index – 2017 released by Residential Auctions Company (RAC), housing markets is losing momentum in highbrow residential locations within the selected areas. For instance, Lagos Island sub-locations of Ikoyi, Victoria Island and Lekki Phase 1, house prices moved in different directions in 2016. In Ikoyi, asking house prices were down by -12.29 per cent. Also in Victoria Island, asking house prices fell by -10.62 per cent.

The drop in asking house prices in both sub- locations can simply be attributed to the excess supply of houses on the market for sale and waning demand for housing, due to few buyers, bringing about a low volume of transaction.

However, in Lekki Phase 1, asking house prices rose by 15.53 per cent due to renewed interest and demand for houses in this location. Overall, average house prices in Lagos Island house fell for the second year running in what could be termed to be a market correction of prices.

The last 12 months saw asking house prices fall in this market by -5.58 per cent as the average house price for a four/five-bedroom house was N172, 214, 772. Despite the -5.58 per cent drop for 2016, it was nothing compared to the drastic drop of the preceding year 2015 of -25 per cent and shows that the Lagos Island housing market is showing some form of resilience and come back.

In Lagos Mainland, asking house prices varied across different sub-locations as some locations saw drops in asking prices and others saw a rise in asking house prices.

Overall, average house prices in Lagos Mainland increased by 2.33 per cent as the average house price for a four/five-bedroom house was N75,509, 463. The steep increase keeping in line with the increase recorded for the preceding year 2015 at 20per cent.

“The reason for the sustained growth in Lagos Mainland house prices can be attributed to the low supply of houses particularly new housing units in this geographical location and sustained demand,” according RAC Managing Director, Rotimi Akinlose.

“There is no better time particularly for investors seeking long term capital appreciation of assets to invest in the real estate market as we anticipate to see asking prices rising this year.”

Is the CEO/Founder of Investors King Limited. A proven foreign exchange research analyst and a published author on Yahoo Finance, Businessinsider, Nasdaq, Entrepreneur.com, Investorplace, and many more. He has over two decades of experience in global financial markets.

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Crude Oil

Oil Prices Dip on Sluggish Demand Signs and Fed’s Interest Rate Outlook

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Oil prices on Monday dipped as the U.S. Federal Reserve officials’ comments showed a cautious approach to interest rate adjustments.

The dip in prices reflects concerns over the outlook for global economic growth and its implications for energy consumption in the world’s largest economy.

Brent crude oil, against which Nigerian oil is priced, slipped by 7 cents or 0.1% to $82.72 per barrel while U.S. West Texas Intermediate crude oil stood at $78.21 per barrel, a 5 cents decline.

Auckland-based independent analyst Tina Teng highlighted that the oil market’s focus has shifted from geopolitical tensions in the Middle East to the broader world economic outlook.

Concerns arose as China’s producer price index (PPI) contracted in April, signaling continued sluggishness in business demand.

Similarly, recent U.S. economic data suggested a slowdown, further dampening market sentiment.

The discussions among Federal Reserve officials regarding the adequacy of current interest rates to stimulate inflation back to the desired 2% level added to market jitters.

While earlier in the week, concerns over supply disruptions stemming from the Israel-Gaza conflict had provided some support to oil prices, the attention has now turned to macroeconomic indicators.

Analysts anticipate that the U.S. central bank will maintain its policy rate at the current level for an extended period, bolstering the dollar.

A stronger dollar typically makes dollar-denominated oil more expensive for investors holding other currencies, thus contributing to downward pressure on oil prices.

Furthermore, signs of weak demand added to the bearish sentiment in the oil market. ANZ analysts noted that U.S. gasoline and distillate inventories increased in the week preceding the start of the U.S. driving season, indicating subdued demand for fuel.

Refiners globally are grappling with declining profits for diesel, driven by increased supplies and lackluster economic activity.

Despite the prevailing challenges, expectations persist that the Organization of the Petroleum Exporting Countries (OPEC) and their allies, collectively known as OPEC+, may extend supply cuts into the second half of the year.

Iraq, the second-largest OPEC producer, expressed commitment to voluntary oil production cuts and emphasized cooperation with member countries to stabilize global oil markets.

However, Iraq’s suggestion that it had fulfilled its voluntary reductions and reluctance to agree to additional cuts proposed by OPEC+ members stirred speculation and uncertainty in the market.

ING analysts pointed out that Iraq’s ability to implement further cuts might be limited, given its previous shortfall in adhering to voluntary reductions.

Meanwhile, in the United States, the oil rig count declined to its lowest level since November, signaling a potential slowdown in domestic oil production.

As oil markets continue to grapple with a complex web of factors influencing supply and demand dynamics, investors and industry stakeholders remain vigilant, closely monitoring developments and adjusting their strategies accordingly in an ever-evolving landscape.

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Crude Oil

Brent Crude Hovers Above $84 as Demand Rises in U.S. and China

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Brent crude oil continued its upward trajectory above $84 a barrel as demand in the United States and China, the two largest consumers of crude globally increased.

This surge in demand coupled with geopolitical tensions in the Middle East has bolstered oil markets, maintaining Brent crude’s resilience above $84 a barrel.

The latest data revealed a surge in demand, particularly in the U.S. where falling crude inventories coincided with higher refinery runs.

This trend indicates growing consumption patterns and a positive outlook for oil demand in the world’s largest economy.

In China, oil imports for April exceeded last year’s figures, driven by signs of improving trade activity, as exports and imports returned to growth after a previous contraction.

ANZ Research analysts highlighted the ongoing strength in demand from China, suggesting that this could keep commodity markets well supported in the near term.

The positive momentum in demand from these key economies has provided a significant boost to oil prices in recent trading sessions.

However, amidst these bullish indicators, geopolitical tensions in the Middle East have added further support to oil markets. Reports of a Ukrainian drone attack setting fire to an oil refinery in Russia’s Kaluga region have heightened concerns about supply disruptions and escalated tensions in the region.

Also, ongoing conflict in the Gaza Strip has fueled apprehensions of broader unrest, particularly given Iran’s support for Palestinian group Hamas.

Citi analysts emphasized the geopolitical risks facing the oil market, pointing to Israel’s actions in Rafah and growing tensions along its northern border. They cautioned that such risks could persist throughout the second quarter of 2024.

Despite the current bullish sentiment, analysts anticipate a moderation in oil prices as global demand growth appears to be moderating with Brent crude expected to average $86 a barrel in the second quarter and $74 in the third quarter.

The combination of robust demand from key economies like the U.S. and China, coupled with geopolitical tensions in the Middle East, continues to influence oil markets with Brent crude hovering above $84 a barrel.

As investors closely monitor developments in both demand dynamics and geopolitical events, the outlook for oil prices remains subject to ongoing market volatility and uncertainty.

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Crude Oil

Brent Plunges Below $83 Amidst Rising US Stockpiles and Middle East Uncertainty

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The global oil declined today as Brent crude prices plummeted below $83 per barrel, its lowest level since mid-March.

This steep decline comes amidst a confluence of factors, including a worrisome surge in US oil inventories and escalating geopolitical tensions in the Middle East.

On the commodity exchanges, Brent crude, the international benchmark for oil prices, experienced a sharp decline, dipping below the psychologically crucial threshold of $83 per barrel.

West Texas Intermediate (WTI) crude oil, the US benchmark, also saw a notable decrease to $77 per barrel.

The downward spiral in oil prices has been attributed to a plethora of factors rattling the market’s stability.

One of the primary drivers behind the recent slump in oil prices is the mounting stockpiles of crude oil in the United States.

According to industry estimates, crude inventories at Cushing, Oklahoma, the delivery point for WTI futures contracts, surged by over 1 million barrels last week.

Also, reports indicate a significant buildup in nationwide holdings of gasoline and distillates, further exacerbating concerns about oversupply in the market.

Meanwhile, geopolitical tensions in the Middle East continue to add a layer of uncertainty to the oil market dynamics.

The Israeli military’s incursion into the Gazan city of Rafah has intensified concerns about the potential escalation of conflicts in the region.

Despite efforts to broker a truce between Israel and Hamas, designated as a terrorist organization by both the US and the European Union, a lasting peace agreement remains elusive, fostering an environment of instability that reverberates across global energy markets.

Analysts and investors alike are closely monitoring these developments, with many expressing apprehension about the implications for oil prices in the near term.

The recent downturn in oil prices reflects a broader trend of market pessimism, with indicators such as timespreads and processing margins signaling a weakening outlook for the commodity.

The narrowing of Brent and WTI’s prompt spreads to multi-month lows suggests that market conditions are becoming increasingly less favorable for oil producers.

Furthermore, the strengthening of the US dollar is compounding the challenges facing the oil market, as a stronger dollar renders commodities more expensive for investors using other currencies.

The dollar’s upward trajectory, coupled with oil’s breach below its 100-day moving average, has intensified selling pressure on crude futures, exacerbating the latest bout of price weakness.

In the face of these headwinds, some market observers remain cautiously optimistic, citing ongoing supply-side risks as a potential source of support for oil prices.

Factors such as the upcoming June meeting of the Organization of the Petroleum Exporting Countries (OPEC+) and the prospect of renewed curbs on Iranian and Venezuelan oil production could potentially mitigate downward pressure on prices in the coming months.

However, uncertainties surrounding the trajectory of global oil demand, geopolitical developments, and the efficacy of OPEC+ supply policies continue to cast a shadow of uncertainty over the oil market outlook.

As traders await official data on crude inventories and monitor geopolitical developments in the Middle East, the coming days are likely to be marked by heightened volatility and uncertainty in the oil markets.

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