African Countries Offering The Best Real Estate Investment Opportunities

African Countries Offering The Best Real Estate Investment Opportunities

Real estate business is a very lucrative one and people who know about the huge returns that is made in the business do not relent in making investments in it. The reason why the real estate business is very attractive in Africa is not far fetched. It is because there is an increase in urban settlement and people move to these areas in search of greener pastures and a fundamental that needs to be met is housing or accommodation and this is where real estate comes in.

The increase of these move from rural areas to urban areas creates a lot of needs which real estate meets such as accommodation, recreational centers, parks, office spaces, shopping malls, lock up shops, amongst others.

In addition a lot of big companies are looking for locations to set up their buildings in these new developing urban areas. The growth of regional tech hubs and an increasing oil and gas sector provides employment for job seekers and some times don’t make accommodation provision for their employees but leaves it for them to tackle by themselves.

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The population of Africa is also increasing every day and is a cause of concern for the government as the government should contribute to the provision of accommodation for its citizens. People will always clamour for accommodation in different capacities and for various purposes. While some may want luxurious accommodation, others may want just a basic structure, some may want a building for commercial purposes while some want it for residential purposes, the list just goes on and on.

If you want to go into real estate, there are five countries you shouldn’t miss out on. However an advice is to ensure that you have a good developer to be your partner.

Angola

Angola ranks as Africa’s fifth largest economy. It has Luanda and Huambo as its major cities. Irrespective of fact that construction of new properties is going on in these two cities, especially Luanda, the country is still in dire need of comfortable office and residential buildings. Studies have shown that most of almost 300,000 square meters of office space available in the market in 2014 – 2015 was already leased or sold even before it was officially open. Even though oil prices have decreased, the oil sector is still the major occupier of local real estate and it seems it will be so for a long while. Prices for office space, are currently the highest in Africa at $150 per month in Luanda (the 2nd highest in Africa is roughly $65.

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An improving industrial property market that is mostly associated with the oil sector – is fully occupied, particularly in the Luanda port area. Some space is open in Viana to the east of the city. There is however strict criteria for intending tenants so the number of tenants that actually get access is greatly limited. The after math of this is that officials are always on the lookout to improve warehouse space, particularly as port activity improves in the near future.

The retail market, even though it is still young, also gives a large return on investment with prices at $120 monthly and a quickly improving middle class in Luanda.

Nigeria

Nigeria is Africa’s largest economy. It’s major cities are Lagos and Abuja. There are diverse opinions from property developers in Lagos and Abuja on the effects of recent construction. Capital has been invested substantially into both cities. However the prices in these two places are arguably the most expensive. Lagos office space rents for $85 monthly while the Abuja office space, even though in a market nearly 1/4 the size of Lagos rents for US$72 monthly.

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As a result of Nigeria being Africa’s sixth fastest growing economy ( as stated in IMF projections from 2015-2019), Nigeria has the tendency of being the most attractive market for retail property. Private equity funds have been operational in this space in Nigeria for a long time but prices have remained high. It houses the 3rd and 4th most expensive market for retail space at $80 and $72 monthly in Lagos and Abuja respectively. New construction was slowed down before the election but has returned to normalcy with prices not projected to substantially reduce till late 2016, if not later,. This is because the population increase in Lagos is still one of fastest in Africa. The price for accommodation is still very high only challenged by the previously mentioned Angola. An executive house with 4 bedrooms could go for $8,000 and $8,500 monthly in Lagos and Abuja. In Angola, the same property would go for about $25,000.

Egypt

Egypt is currently Africa’s third largest economy. It’s major cities are Cairo, Alexandria and Giza. Although Egypt is Africa’s third largest economy it is not one of Africa’s fastest growing economy. It did not even make it to the top 20 fastest growing economies in Africa for five years in a row. Despite all these its retail market is doing well and will remain so for a while. The fall in the retail sector that occurred in the Arab Spring affected the growing sector from 2013 through 2014.

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The improvement in 2015 started with the recovery of lost production to equate pre-Arab Spring figures and then stretching at a rate that could pass pre-Arab Spring estimations. Cairo retail space is renting for $100 monthly. Some informed persons estimated that the price could increase in the short term as consumer spending increases and retail development is gradually coming up to meet the demand.

Office space rents for $35 monthly in Cairo. This places it as one of the top 15 expensive cities. However, the presence of a reasonable amount of office space and gradual re-appearing economy (particularly if you remove the retail sector) reduces the advantages for this subsector. The industrial and residential market are equally in the same situation with reasonable prices as compared to other major African cities.

Mozambique

Offshore natural gas and an increasing middle class influences the dynamic real estate landscape in Mozambique and the country’s global perception. Studies have shown that It is the 2nd fastest growing economy in Africa over the next five years, following Ethiopia. Its capital is Maputo with a population of less than 2 million people, real estate prices has indicated signs of reducing .

Office space goes for almost $40 monthly. Demand quickly increases as banks, telecoms, and diplomatic/aid agencies take up the little quantity of good properties. Oil and gas executives who come in has successfully changed luxurious apartments into office space at least until property developers can do something about the situation and provide good accommodation that will suit the demand.

The Mozambican government has plans on ground to invest substantially in the country’s industry and manufacturing market. This has improved industrial real estate as companies now clamour for the offer. Prices at the ports, particularly for warehouses, is one of Africa’s most expensive. However, reports from government officials insinuates that this subsector might not be as attractive as the office space subsector. This is because the government might fix a price that might cause a reduction on prices.

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Retail, irrespective of the fact it is almost at the same stage, has more advantage as consumer spending grows. Retail space goes for $40 monthly in Maputo. This makes it one of the ten most expensive African cities for such space. It is equally a city that will notice fast increase in incomes, post-gas production and export in the near future.

South Africa/Kenya

The two countries are very attractive to real estate investors as there is ample opportunity to make a a lot of gain. There is a lot of retail space is in the two countries that pays a lot, particularly in Johannesburg (SA), Cape Town (SA), and Nairobi (Kenya). The retail space is actually the 5th most expensive at US$60 monthly in both Johannesburg and Cape Town and 8th expensive at US$48 monthly in Nairobi. Irrespective of the fact that this looks like a very good deal on the surface, research has shown that recent strikes that has occurred in the South African market and the terrorism occurring in Kenya has reduced the demand from interested retail tenants because the local economies tackle the internal issues. Office space prices normalized over the last 12 months in Kenya as business has not been growing until the government handles its suddenly re-surfacing terrorism issue.
Having said all that, we are talking about the 2nd largest and 8th largest economies in Africa, focusing on South Africa and Kenya respectively with Kenya shown to be the 10th fastest growing economy in Africa through 2019. So even though it seems risky to be a real estate investor in there places, it will be worth the risk when you start making your huge returns, according to research.

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