- The global market has recovered and stroke a 54 per cent investment activity
- The real estate market is expected to grow to US$3.74 trillion in 2022
- Tanzania, Rwanda, Ghana, Kenya and Ethiopia are real estate emerging markets
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.
The latter 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 per cent, according to a real estate market monitor, JLL.
Another round of analysis by the Real Estate Global Market report 2022 indicated that the global real estate market is expected to grow from around US$3.3 trillion in 2021 to US$3.74 trillion in 2022 at a compound annual growth rate of 10.5 per cent.
The latter is attributed to 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 per cent in 2021, and the local real estate sector remained stable for the first time in 15 years.
Numbers favour Africa’s real estate development. In this context, it is vital to factor in the growth of the continent’s rapid population growth, standing at over 2.45 and expected to hit 2.8 billion in 2060.
With the growth of emerging economies such as Tanzania, Rwanda, Ghana, Kenya and Ethiopia, where their economies are being diversified, propelling the growth of a healthy middle class, real estate markets expand along with them.
The African Development Bank (AfDB) pointed out that the middle class is expected to grow from 355 million to 1.1 billion in 2050. Thus, Africa stands to reap benefits from the market as it develops and expands its economic and population base.
Further, as urbanization expands, so as the real estate industry. In the region’s property markets commentary, Knight Frank Africa reported that the number of people living in Africa’s towns and cities is predicted to rise to 60 per cent in 2050 from 40 per cent.
Nigeria, Angola and Ghana are expected to see the highest urbanization rates, which stand at 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.
Africa has never been at a better time to capitalize on the real estate market. The sector is rigged with plenty of modern technology that offers myriad opportunities that shift away from traditional uses and increase transparency and efficiency.
Africa Business Insider pointed out ten pathways for investors to benefit from investing in the African real estate market in 2022.
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.
Real estate investment trusts (REITs) allow investors to acquire profits without holding physical property. According to Business Inside Africa, REITs provide diverse opportunities to investors, primarily in the market niches.
“Africans can buy and sell real estate investment trusts in the open market for rewards”, Business Insider Africa noted.
Contract flipping, the transfer of the right to purchase a property to another buyer, is the third honey pot for investors to dip their hands, especially new actors in real estate.
Business Insider Africa noted that new African investors could act as an intermediary between property owners and buyers for rewarding opportunities.
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.
Short sales are another angle to explore—as it portrays a money-making opportunity for African investors who wouldn’t need to invest in renovations.
Business Insider Africa argues this pathway to be “ideal for homeowners who are behind their mortgage payments. According to Investopedia, short sales happen when a financially distressed property owner agrees with a mortgage lender to facilitate the sale of a property”.
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.
Also, hard money lending for investors angling to acquire properties with value for brief periods for a loan-based approach is a profitable path presented in the region.
Proptech in Africa
Office residential, retail and industrial remain the go sectors for African real estate investors. The sector is noted to have taken a keen look at the adoption of technological innovation, which lays a solid foundation in the ‘property technology-proptech’ sector (Knight Frank).
Real estate innovation is another breed of real estate that offers a myriad of potential to the market on a global scale.
Proptech marked US$12 billion in2016, a remarkable increase from US$20 million in 2008, with an estimated US$4.6 billion invested in proptech in the first six months of 2019.
Although the region’s market strength within proptech stands at 1 per cent globally, Africa’s technology ecosystem is among the fastest-growing globally.
The latter shows how much potential Africa can explore from its underdeveloped but profitable real estate market. Africa is gradually arming itself with the current innovation know-how in all sectors, including proptech.
According to the real estate commentary, Africa reflects the latter via digitisation by “several countries of their land administration process, the rise in co-working spaces and the continued growth in online retail”.
“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.