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The Ultimate Guide To Investing In Africa’s Real Estate

Over the past decade, Africa has made significant strides in its development. As a result, real estate opportunities are on the rise, shattering the common misconception that Africa is solely a continent of poverty. In addition, the rise in real estate development creates new opportunities for investing on the continent.

There are several reasons for the growth of the African real estate development industry, one being the increase in the number of wealthy people on the continent. 

Between 2006 and 2015, there was a 28% growth in this number, giving rise to a wealthy class that can afford luxury homes. In addition, most parts of Africa now have better internet connectivity, which has boosted e-commerce and digital marketing activity. This has significantly affected real estate marketing, as it’s easier for marketers to reach consumers through social media.

Growth In The Middle Class And Increased Purchasing Power

The demographics of Africa have immensely changed over the past decade, resulting in the formation of a new African society. Population growth and urbanisation have led to a higher demand for housing. 

Africa’s real estate development thus is on the rise due to the growing demand for infrastructure and affordable housing. With a large percentage of young people unable to own a home, there has been an increased need for social housing developments across the continent. This has resulted in a significant expansion of buildings and new developments, contributing to the overall growth of the African real estate market.

The individual economies of African countries are experiencing a period of rapid growth and expansion. As a result, the continent is becoming increasingly attractive to investors, with more people having access to bank accounts and credit cards and a growing middle class. Additionally, more economies are becoming stable.

Projections

By 2050, the population of Africa is expected to reach over 2.5 billion people, according to United Nations estimates. This would mean a lot of economic development for the continent, which is more than adequate. In addition, the African Development Bank projects that by 2050, there will be 1.1 billion people in the middle class, up from 355 million today. If these two crucial factors—economic expansion and population growth—occur, the continent will see a real estate boom.

The real estate sector in Africa is a goldmine that realtors and investors should explore. Even though the Covid-19 pandemic has shaken the market, it still exudes many promising benefits.

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The Global Perspective

The global real estate industry is set to grow at a compound annual growth rate of 10.5% from $3.3 trillion in 2021 to $3.74 trillion in 2022, according to a recent study by the Real Estate Global Market report 2022. This is due to the sector’s operations being reorganized and recovering from the COVID-19 pandemic, which had a negative impact on the industry. Things are developing quite interestingly in Africa.

Looking Ahead

The population growth in Africa is staggering and is already over 2.45 billion people, with a projected increase of 2.8 billion people by 2060. From this perspective, it is crucial to consider the continent’s swift population increase when considering real estate growth.

As African economies continue to develop and diversify, we are seeing a corresponding rise in the number of people in the middle class. This trend is driven by many factors, including population growth and economic expansion. According to the African Development Bank, by 2050, there will be 1.1 billion people in the middle class, up from 355 million today. This presents a significant opportunity for businesses and investors in the real estate market. As Africa’s economy continues to grow and mature, we can expect to see continued demand for property and development projects that cater to this growing middle class.

The real estate sector is expected to grow along with urbanisation. According to Knight Frank Africa’s commentary on the region’s real estate markets, 60% of Africans are expected to live in towns and cities by 2050, up from 40% today.

The highest urbanisation rates, projected to reach 80% by 2050, are anticipated in Nigeria, Angola, and Ghana. By 2030, at least six of the world’s 43 megacities—Kinshasa, Lagos, Luanda, Johannesburg, Cairo, and Dar es Salaam—are anticipated to be located in this region.

The real estate industry in Africa is growing rapidly due to the region’s expanding economies and rising populations. The market will eventually control the leading markets in the world.

The African real estate market is ripe with potential for those who know how to take advantage of it. With maturing capital markets, securitization, enhanced governance, political stability, and a population of over one billion consumers, the opportunities for increased profits are numerous. Today, Africa is a continent of progress and opportunity.

Samuel Ogbu, Chief Executive Officer of Liberty Properties, believes there is great potential for growth in the African real estate market. With 53 countries currently recognised by the United Nations and South Sudan added in 2011, Africa is a continent on the rise, and this is reflected in the increased awareness of property investment opportunities throughout the region.

What Opportunities Exist In Africa’s Property Market?

There is a strong demand for retail and mixed-use developments across Africa. For example, Liberty Properties is constructing the Levy Shopping Centre in Lusaka, Zambia, the first fully enclosed shopping mall on the continent, valued at $200 million. Abuja, Nigeria, is another example of Africa’s burgeoning real estate landscape. In the next few years, the city will attract major investments in property, driven by increased consumer spending and business-friendly policies.

The African real estate market is booming, with investors attracted by the potential for high yields. According to Knight Frank Newmark Research, countries including Botswana, Kenya, Tanzania and Zambia have seen yields of over 10 percent in the industrial sector. Across all sectors, many countries have attractive and steadily growing yields.

The research conducted by the European Real Estate Association indicates that real estate is the biggest asset class in the world, with 2.4 percent of global stocks in property and 5.5 percent in listed property. However, while there are thousands of listed property companies in the world, only a handful are in Sub-Saharan Africa. The report reveals that countries such as Ghana, Nigeria, Kenya, and Angola have no listed property companies in Africa.

A report on the state of Sub-Saharan Africa’s listed property market showed that it has a capitalization of $18 billion and that 98% of that is in South Africa. The report went on to say that in the last decade, there has been a ten-fold increase in the market capitalization of South African listed property and that this is expected to grow in the next three to four years.

Many African countries are without stock exchange markets, including Algeria, Libya, Chad, Ethiopia, Sudan, and the Democratic Republic of  Congo. However, there are still some sought-after countries in Africa to buy property in, such as Ghana (oil and stability), Nigeria (consumer story), Angola (oil, consumer story and urbanization), Zambia (copper and stability), Botswana (high level of securitization and the CBD shifting towards the airport), South Africa (formal economy and stability), Namibia (oil and stability) and South Sudan (oil, new independence and infrastructure).

It’s projected that African real estate markets will be formalised in the next decade, and we will start to see more listed property companies and investment funds enter the market. This is an exciting time for Africa as the continent grows and develops even more.

NEXT: Kenneth Sharpe is Putting Zimbabwe’s Real Estate in the Global Spotlight

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