African real estate — Potential investors honeypot

Real estate in Africa as a sector is a goldmine that which realtors and investors must explore.

Despite the Covid-19 pandemic shaking the market, still, the sector portrays rather promising benefits. Africa has never been at a better time to capitalize on the real estate market.

According to United Nations figures, Africa’s population is estimated to hit over 2.5 billion in 2050.

A more than adequate economic growth will be realised on the continent. The middle class is expected to grow from 355 million to 1.1 billion in 2050 according to the African Development Bank. Thus, Africa stands to reap benefits from the market as it develops and expands its economic and population base.

If the continent has these two key elements: economic growth and population growth, the boom in real estate will indeed be there.

Tanzania, Rwanda, Kenya, Zambia and Ethiopia are real estate emerging markets.

Nigeria, Angola and Ghana are expected to see the highest urbanisation rates, which is expected to grow to 80 per cent by 2050. In addition, the region is expected to host at least six of the world’s 43 megacities by 2030, Kinshasa, Lagos, Luanda and Johannesburg, Cairo and Dar es Salaam.

The South Africa Residential Real Estate Market is expected to grow at a Compound Annual Growth Rate of greater than 9% during the forecast period (2022-2027).

The country’s demographics show that 15.6 million South Africans are aged 20 to 34. With the right economic opportunities, some of them will be entering the market as first-time buyers.

Others who already own a home, are discovering property’s potential to create wealth. Instead of upgrading to a larger next home, they are starting to build property portfolios. The good news for new investors is that interest rates are favorable and the current slow rental growth is likely to improve over time.

The sector is argued to be a viable emerging opportunity despite underlying issues of cost of living and inflation levels posing a challenge to its growth. The global capital markets recovered strongly during 2021, with annual investment activity surging by 54%, according to a real estate market monitor.

Another round of analysis by the Real Estate Global Market report 2022 indicated that the global real estate market is expected to grow to US$3.74 trillion in 2022 at a compound annual growth rate of 10.5%. The growth will be necessitated by the rearrangement of operation and recovery from the Covid-19 impact, which limited the sector’s operations.

In Africa, things are progressing rather interestingly. Egypt’s real estate market has emerged strongly from the pandemic shackles.

According to the Egyptian Ministry of Planning, the sector grew by 8% in 2021, and the local real estate sector remained stable for the first time in 15 years.

With the growth of emerging economies such as Tanzania, Rwanda, Ghana, Kenya, Zambia and Ethiopia, where their economies are being diversified, propelling the growth of a healthy middle class, real estate markets expand along with them. Long-term residential rentals are argued to be one of the fastest ways for an investor to garner profits as the rising population in Africa calls for substantial development of decent shelter.

Another great opportunity is through Real estate investment trusts (REITs) which allow investors to acquire profits without holding physical property.

Commercial real estate stands to levitate realtors in Africa who will update and modernize a property to shoot up profit margins. Lease options offer substantial profits with less capital as investors can buy rented property at the end of a specified period.

Vacation rentals which bring about renting an apartment or house for a short time, are a lucrative pool to garner profits for the region’s investors. The same benefits apply to home renovation flips that buy a property to rehabilitate it and sell it to the market.

“At the moment, there are more than 500 co-working spaces across the continent, 80 per cent of which have sprung up in the past three years. This trend is expected to continue to grow rapidly.

“This has been attributed to the dynamic shift towards space as a service demand, from individuals, entrepreneurs and corporates, and the growing younger demographic,” Knight Frank report noted.

Real estate is a profitable and growing sector in Africa. The rising population, expansion and diversification of the economy in the region’s active nations portray a healthy growth of the sector.

It is a matter of time for the market to take over the world’s leading markets.

Despite the uncertainties surrounding Covid-19 and the subsequent lockdowns, the residential property market became one of South Africa’s more robust sectors.

While first-time buyers boosted the housing market in 2020, repeat purchasers drove the national housing market in 2021, as first-time buyers felt the brunt of the sluggish economy and the fading of the benefits of the rate cuts.

Patson Chapeyama is a cutting edge business startup and Immigration Specialist. He is the Founder and Managing Director of Immicom Immigration and Business Solutions.