Over the past decades, it has been burned into most people’s minds that Africa is a continent of economic and social distress plagued by constant strife, its institutions being rife with corruption and lacking governance. This might be true for the handful of Africa’s failed states that certainly exist, but is not the case for most of the continent’s nations, which in fact enjoy robust political and economic progress, and are outnumbering the few chaos countries by far.
Many people make the mistake of underestimating the continent, particularly in terms of investment opportunities, for example in real estate. Yes, Africa’s real estate markets have traditionally lagged behind those of developed and most developing economies, and the level of property investment in Sub-Saharan Africa is still comparably low, while tapping potential opportunities sometimes can be met by practical challenges.
Nonetheless, most of Africa is not standing still, but moving up the development ladder at an impressive pace.
“Africa’s economic growth began to accelerate around the turn of the century, following several decades of economic stagnation,” says Peter Welborn, head of Africa at property firm Knight Frank. “Since 2000, Africa has averaged growth of over 5 per cent per year. The larger emerging economies of this region, such as Nigeria, Kenya, Angola and Ethiopia, have increasingly been the key drivers of the continent’s growth.
“Tanzania, Rwanda, Ivory Coast and Senegal have also emerged as star performers.”
There are a couple of factors that will drive the African real estate sector in the mid term. One is the continent’s population boom. Africa’s population currently stands at over 1 billion and is expected to reach 2.4 billion in just 40 years. This means that in the coming decades, hundreds of millions of Africans will need additional roofs over their heads.
“This population growth is the strongest underlying reason for the huge demand for accommodation and real estate properties across Africa,” says John-Paul Iwuoha, founder and head of Smallstarter Africa, an investment and entrepreneurship community based in Lagos, Nigeria. Calling Africa “the hottest property market in the world”, Iwuoha points out the huge number of people migrating into urban areas in search of jobs and business opportunities.
“Going by the current estimates, 300 million more Africans will become city people and urban dwellers by 2030,” Iwuoha says.
This will not only interest private property investors, but also GCC developers. Moreover, governments are not doing enough to solve the housing shortage, which brings opportunities for private developers and foreign investors. The rise of the urban middle class and the increasing number of expats lured by rapid economic growth are also encouraging modern retail and office developments in many of Africa’s major cities.
“The retail sector will develop rapidly as growing populations and a burgeoning middle class demand greater volumes of more varied goods,” says Ilse French, Africa real estate leader at consultancy PwC. “The need for economic diversification will support the expansion of non-resource sectors and investment opportunities will arise through an increase in demand for real estate from these sectors.”
According to Welborn, in Africa the global slump in oil prices has been balanced out by other industries. “Real estate demand stemming from oil companies and the associated service supply sector has eased in all the African oil-driven markets,” he says. “Conversely, in the retail sector, the demand across Africa from the growing middle class has continued to create a marked increase in activity, particularly in the francophone countries. This increase in tenant demand has encouraged new schemes to be proposed. Abidjan, the economic capital of Ivory Coast, is a really good example where the proposed schemes are supported by offshore investors.”
Sub-Saharan Africa’s largest cities are currently some of the fastest-growing urban areas in the world. UN forecasts say that the populations of Lagos, Kinshasa and Luanda will all grow by more than 70 per cent during the 2010-2025 period, while Dar es Salaam, Kampala and Lusaka are expected to double in size. Lagos has already overtaken Cairo as Africa’s biggest city, and its population may be close to 40 million by 2050, making it a truly global megacity.
This is already creating shortages and a considerable impact on property prices. “Prime office rents in Luanda, Angola, are among the highest in the world at $150 [Dh551] per square metre per month,” says Welborn.
According to PwC, other key growth drivers for Africa’s property market are ongoing industrialisation, which is funded by foreign investors, namely China, and growing intra-African trade and investment.
Many developers in Africa are also adopting modern construction practices, including eco-friendly technologies such as solar building integration, climate-responsive building strategies, renewable building materials, recycling and reuse, ecological building materials, low-cost design and the use of innovative design tools. This can be seen, among others, in new urban developments such at One Airport Square in Ghana, Konza City in Kenya, Eko-Atlantic in Nigeria and Roma Park in Zambia — these countries also have the most progressive property markets in Africa alongside South Africa, Angola, Mozambique, Tanzania, Namibia and Mauritius, according to PwC.
Furthermore, Nigeria is now recognised as Africa’s largest economy as per its current GDP, ahead of South Africa and Egypt. Large cities in fast-growing African nations will continue to attract more and more people, driving the growth of the real estate market. Consequently, affordability could become an issue, leading to greater urban density and smaller apartments. Developers that will succeed are ones that are innovative and efficient about how they design and build real estate. To that end, construction techniques such as prefabricated buildings and 3D printing offer new potential for fast, cheap and eco-friendly development.
Posted on : 12 Jul,2017