Common real estate trends in Africa?

Africa is quite a unique continent. It’s people and cultures differ greatly from the rest of the world. When it comes to real estate, there’s some unique trends specific to Africa.
This blog post shares six trends to take not of if you’re interested in investing in African real estate.
 
Africa is the second largest continent in the world, with a population of over 1 billion people and an estimated landmass of 11,690,000 km2 (4,507,000 sqm).
 
Many countries on the continent are emerging from decades long civil wars and conflicts. This means that new opportunities for development are abound. As investment in Africa increases, so too is interest from investors around the world.

Urbanization

Africa’s urbanization rate is one of the fastest growing around the world. Some cities are so densely populated that they are bursting at the seams. More Africans are moving from rural areas into urban areas on a daily basis.

 
There’s many reasons leading to rural urban migration. Cities provide opportunities that they do not have back in the villages. For example; job and income generating opportunities. Improved living conditions and decent health care, etc.

Renting is still only option for majority

Owning a home is a far fetched dream for most people in Africa. Many still live below $2 a day. This means they are incapable of affording property investments like homes and land. So this lives many with the only option to rent. There’s also a rising working and middle income class. This demographic lives on the same salary but unable to afford their own place. This has created huge demand for rental properties across the continent.
 

Lifestyle changes dictating property types

The post-covid era has seen many people opting to work from home. As a result of this we are now seeing the creation and conversion of office spaces in homes.

 
All in all, what was once wasted space in many homes, is now utilized for different purposes as people adjust their lifestyles. Many are also downsizing from bigger homes to smaller units. This is due to financial constraints caused by this recent pandemic.
 

Technology aspect

There is a significant rise in urban dwellers renting out their spare rooms through Airbnb, and other online apps. One now has the ability to rent a whole apartment in another city without ever having been there before.

The average guest is only staying for 2 days, and that means you get more space per square foot than if occupied by someone full-time. This is a growing trend especially among urban dwellers and middle income classes.
 

Economic Growth

Africa is expected have an increase in its economic growth rate over the next decade. This is due to increased urbanization, infrastructure investment, and simplifying trade and investment regulations.

 
The current low interest rate environment in South Africa is a key factor for home ownership. The competitive home loan deals also create an ideal buying environment for the first time homebuyer.
 
In Ghana, the government has ensured to build a conducive social, political and economic environment. This is consistently attracting foreign investment and settlement.
 
Rwanda is one of the fastest growing economies in the world today. This makes it an attractive destination for both potential home buyers and investors looking to invest their money. Rwanda’s GDP growth rate reached 9.4% in 2019 after averaging 8% growth per year over the last 2 decades. This trend is projected to bounce back this 2021-2022, from the slump in growth caused by the pandemic.
 
These are all indicators of a strong emerging market and attractive destination for investment. And this is sure to impact higher homeownership rates across Africa going forward.
 

Growing middle class

The growing middle income class is driving housing demand across the continent. This class is dictating and influencing construction designs. Many are opting for more modern and luxury homes with enhanced features and facilities, for an improved quality of life.

 
Developers are scrambling for new projects that cater specifically to this demographic. They’re building communities with all amenities included, hospitals, schools, shopping malls.
 

Property Types

Another trend that we see now is that more apartment blocks are being built as well as multi-family developments. This is a growing trend globally and a sign of urban areas becoming too over-crowded. As such people are looking for an affordable living option.

 
Developers are moving to less crowded suburban lifestyles as opposed to bustling cities. This shift signifies a growing global interest. Access to green spaces and tranquility outside the hectic bustle common in cities and urban areas.
 

Government Intervention

There is a need for affordable housing in Africa. African governments are making an effort towards housing affordability through new legislations. This is providing much needed relief for many people living on lower incomes and cannot afford houses on the market today
 
With the population increasing rapidly, there are many people looking for housing that is affordable and safe. Countries like Rwanda have jumped to this need by constructing affordable housing near urban areas. The target is for home owners within an income bracket of  $220 to $771 per month.
 
Many international organizations have jumped to this cause. IFC a sister organization to the World Bank initiated a scheme recently. They partnered with a Chinese multinational construction company to develop affordable housing in Africa.
 
In conclusion, it is important for individuals, investors and organizations to understand the current social, economic, political and cultural trends in Africa. These impact future real estate investment and development.
 
For example, there has been a growing middle class with greater purchasing power, but there are still challenges such as affordable housing due to rapid population growth. The lifestyle patterns of Africans may be changing rapidly as well which will likely impact urbanization rates in the coming years. Understanding these dynamics can help investors, and other key players make better decisions when considering African properties or developing new projects on this continent’s emerging markets.

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