Africa Investments
Africa is the world’s second-largest and second-most-populous continent. At about 30.3 million km² (11.7 million square miles) including adjacent islands, it covers 6% of Earth’s total surface area and 20.4 % of its total land area. With 1.2 billion people as of 2016, it accounts for about 16% of the world’s human population. However, experts predict a huge population boom across the continent in the 21st century and estimate almost 40% of the world’s population will live in Africa by 2100.
The continent is surrounded by the Mediterranean Sea to the north, both the Suez Canal and the Red Sea along the Sinai Peninsula to the northeast, the Indian Ocean to the southeast, and the Atlantic Ocean to the west.
Economic growth in Africa
Dubbed by economists as the “growth continent”, many believe Africa will have 13 of the fastest growing economies in the world over the next few years.
Following a GDP recalculation in 2014, Nigeria is now considered to be Africa’s largest economy, beating usually dominant South Africa into 2nd place.
A report by Knight Frank nicely summarises the recent economic situation in Africa…
Africa’s economic growth began to accelerate around the turn of the century, following several decades of economic stagnation. Since 2000, Africa has averaged growth of over 5% per annum, with the Sub-Saharan region averaging growth of close to 6%. The larger emerging economies of this region, such as Nigeria, Kenya, Angola and Ethiopia, have increasingly been the key drivers of the continent’s growth.
Rising commodity prices have been an important factor behind Africa’s growth over the last 15 years, particularly in major oil-exporting countries such as Nigeria and Angola. However, Africa’s economic progress has derived from diverse sources and, the large majority of recent growth has come from non-commodity sectors. Underlining this, one of Africa’s fastest growing economies in recent years has been Ethiopia; a country with meagre mineral resources, whose growth has originated from industries such as manufacturing, agriculture and construction.
Nonetheless, the economic outlook for many African economies has been clouded by the steep fall in oil prices that started in the middle of 2014 and continued into 2015. The International Monetary Fund revised downwards its GDP growth forecasts for Africa and expected Sub-Saharan growth to be below 5% in 2015. The short term outlook for Nigeria, in particular, briefly weakened.
Sub-Saharan GDP growth was forecast to move back above 5% in 2016, and to strengthen in subsequent years. This suggests that, as many African economies have diversified and reduced their dependency on commodities, the recent collapse in oil prices may have a less severe impact on Africa than historical commodity price downturns. With sectors such as telecommunications and financial services being increasingly important drivers of growth, Africa will maintain its position as one of the world’s fastest growing economic regions.
The report also details projections about Africa’s rapidly raising population; the UN believes the continent’s population will have quadrupled to 4 billion by 2100. Nigeria alone is expected to grow by 1 billion people! It’s capital, Lagos, has already overtaken Cairo (Egypt) as Africa’s biggest city, with its population set to reach nearly 40 million by 2050!
The largest cities in Sub-Saharan Africa are some of the fastest growing in the world. By 2025 it is suggested that Lagos (Nigeria), Kinshasa (Democratic Republic of the Congo) and Luanda (Angola) will all have grown by 70% from their 2010 populations. Dar es Salaam (Tanzania), Kampala (Uganda) and Lusaka ( Zambia) are expected to double.
With so much grow expected across the continent, now could be the time to invest in Africa’s growing global mega cities…
Africa’s housing market
The rapidly growing economies of Africa are catching the attention of increased numbers of property investors and corporate occupiers. Africa is no longer viewed as a region of long term economic distress, but is increasingly seen as a continent of opportunity. – Africa Report 2015
African real estate had a tough time in 2016 navigating difficult economic conditions. The challenges related to currency shortages in Nigeria and Zimbabwe, whose real estate markets struggled because they had a lack of US dollars in the country.
However, the outlook for African investment, of all kinds, looks bright. With the development of infrastructure, growing economies and emerging industries (Ethiopia) the time to do business here is now. As corporate money enters the continent and companies choose to do businesses here, and even set-up and relocate to African nations, the need for suitable commercial, and with it residential, property increases. The insurmountable population growth that is predicted across the continent by the end of the century, is also a stark reminder of the number of people requiring suitable residential property in the future.
Why invest in property in Africa?
The Global Property Guide is a great resource for learning more about the property markets in any given area. Here are some quick links to the key African stats and facts:
A recent piece in Africa Property News shines a light on Nigeria and its capital Lagos…
“Nigeria has a landmass of 351,649 square miles (910,771 square kilometers). With over 20 Airports and more than 120 million Mobile Phones. There are nearly 70 federal government controlled national and regional television stations, with all 36 states operating their own independent TV station.
Nigeria’s newly calculated GDP, propelling it ahead of South Africa, after the re-basing which happens every 5 years.
Nigeria is truly an enigma, there are now many institutional investors and large corporate companies looking at Nigeria more seriously as a destination for investment and discovery. It’s many diverse cultures are now being adopted and imitated around the world, with Afrobeat music cultivating the worlds youth market, and cultural tribal artwork, working its way into mainstream fashion, now available to purchase at leading private auction houses around the world.
Many economists, activists and experts are speculating about the future of Nigeria with the recent change in Nigeria’s government dominating global news for weeks, however no matter your opinion, it is fair to say that Nigeria today is changing at a rapid rate, and the Nigeria of the future looks brighter now, than ever before.
Lagos has stood out as a large African city which has experienced increased investment and rising house prices.
Meanwhile with respect to residential, Lagos set to benefit from the largest budget ever announced by a Nigerian state in November.
The “Golden Jubilee Budget” coinciding with the State’s 50th anniversary is the largest budget ever by a Nigerian state.
Expectedly, it emanated from the state with the highest grossing internally generated revenues- Lagos state, a major investment and commercial hub comprising of the highest priced real estates in Nigeria across the office, retail, residential and industrial markets.
Nigerians are currently showing a growing interest in residential estates.”
A recent piece in Africa Property News shines a light on Nigeria and its capital Lagos…
Values in Kenya’s residential property market continue to rise sharply, amid robust economic growth and a sharp increase in the population of middle-class and expats.
Kenya’s economy growing between 5% and 6% a year and is expected to expand by more than 6% this year in 2017, according to the International Monetary Fund (IMF), making the country one of the fastest-growing economies in Sub-Saharan Africa. The central bank cut its key interest rate by 50 basis points to 10% in September 2016, to boost economic growth.
Foreigners can freely buy commercial class land in Kenya. This type of land is for income or revenue making purposes.
Yields are moderate to good in Nairobi, Kenya, and one can expect around 6.5% from an apartment.
But Nairobi is not cheap. A five bedroom house can cost $1.1 million in what is still a poor country. But the rental returns are rather good.
A 3 bedroom apartment in an elite district of Nairobi can be bought for around US$200,000.
A 3 bedroom house may go for US$500,000.
Townhouses are somewhere between these two prices.
Gross rental yields on Nairobi apartments are moderately good, at around 6.0% to 7%. Townhouses yield around 5.0% to 6.0%. Yields on detached houses are lower and sit at between 4% 5.5%.
Nairobi property is attractive, with significant capital gains potential. The best combination of rental yield and capital gains seems likely to be offered by townhouses.
