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INVEST IN AFRICAN REAL ESTATE MARKET TODAY FOR ITS PRICES ARE NOW LOW BUT WILL INVEST IN AFRICAN REAL ESTATE MARKET TODAY FOR ITS PRICES ARE NOW LOW BUT WILL INCREASE IN EACH OF THE COMING YEARSINCREASE IN EACH OF THE COMING YEARS

Wondering what next big step to take? The continent of the future, Africa is expanding right now, and here’s the opportunity to expand with it. While the International Monetary Fund (IMF) has warned that in 2015 the global economy could remain trapped on a new “mediocre” growth path, Sub-Saharan Africa is set to make a vibrant growth.

Africa is the world youngest continent and is expected to have the biggest labour force in the world by 2040. By 2100 it is estimated that nearly 40% of the world’s population will live in Africa, with the large majority of this being in the continent’s fast growing cities. Until that time its biggest profits are yet to earn in the next 10 to 30 years. Sub-Saharan Africa is one of the world’s most rapidly developing economic region, and it is projected that 13 of 20 fastest-growing global economies over the next five years will be in Africa.

OUTLOOK OF AFRICAN REAL ESTATE MARKET

A recent report from the Housing Data Centre which collates information from the real estate and housing sector in Ghana, believe that house prices are likely to go up by at least 50 percent in 2015 alone and the Ministry of Water Resources, Works and Housing believes the housing deficit in Ghana stands at around 1.7 million units. At the end of 2013, it was also reported that the average retail rent in Accra had risen by around 50 percent to between $60 to $65 per square meter since 2012. Ghana offers the best Real Estate investment opportunity in West Africa, according to a survey of global property experts, 52% of whom believe. Ghana will offer the strongest financial returns in the region over the next 3 years according to a Clifton Homes study. Nigeria, West Africa’s most populous country, was named as the next most attractive market.

Expert believe Nigerian investments will continue to produce good returns, however the residential property market, especially the high end, has matured. On the other hand, Ghana is experiencing what Nigeria has already gone through and investors do not need to be convinced of the potential in the market, they know exactly what is coming and are investing while they can still acquire prestigious assets at reasonable principe.Nigerian is now the largest economy in Africa with GPD estimated at $594.3bn, followed by South Africa ($341.2bn). Rapid population growth, steadily increasing urbanization and rising incomes-particularly among the middle class-have fuelled expansion in Nigeria’s real estate sector over the past decade, and are expected to continue to drive growth in the industry. While most segments have seen increased investment in recent years, the country remains undersupplied in virtually every area, particularly affordable housing, high-quality retail space and grade-A office space. Activity in Nigeria’s construction industry is expected to continue to rise for the foreseeable future, despite softening demand in a handful of segments due to exogenous factors. The supply and demand differential in the power generation and housing segments alone is expected to result in trillions of naira worth of federal and state-led investment through 2020.

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percent in rand value and 950 percent in volume in just five years, while house prices in the area overall have shown a healthy nominal return on investment of 16 percent a year over the same period. At the same time, the capital return on investment for sectional title units is a staggering 17 percent to 21 percent. A comprehensive survey of all suburbs in the City Bowl and CBD compiled by Lew Geffen Sotheby’s International Realty shows that since the beginning of 2008 a total of 5978 houses and apartments have been sold in the area with a combined value of R12.375 billion. And in the three years since the start of 2012 the sale of 2720 houses and apartments in the City Bowl and CBD were sold to the value of R6175bn. Africa’s young population as well as continued urbanization will drive the demand for real estate even further on the continent. This is according to consulting firm PwC, titled Real Estate: Building the Future of Africa. “Africa represents 15% of the world’s population but only 3% of the global GPD (income)”, said Ilse French, the real estate leader at PwC, on the growth potential of the continent. By 2035, Africa’s labour force will be larger than China’s 67% of Africa chief executives see urbanization and demographic shifts having a major impact in next five years. Africa’s middle class is currently 15 million and by 2030 it will be more than 40 million. By 2025, Lagos in Nigeria will be the 12th largest city in the world in terms of population. Africa’s buying power will be $1.4trn in 2020.

Real estate developments have also taken off in emerging towns across Kenya. Shopping malls, for instance, are opening up in previously agricultural towns. In these fast-growing urban centres, new opportunities are emerging from coffee shops to private schools. The country’s booming property market is said to be responding to demand that has been created by the expanding middle class. Recently, players in the industry held the 20th Kenya Homes Expo in Nairobi. The expo garnered local and international exhibitors drawn from various sectors of the real estate industry. As one of Africa’s best-performing markets for investors, in the past 14 years Kenya’s property prices have increased three-fold, including a 9.6% year-on-year leap from 2011 to 2012, according to HassConsult, a local property development and services firm. Investment returns are in excess of 28%, figures from the Kenya Property Developers Association show. The sector is dominated by Nairobi, which delivers two-thirds of Kenya’s $47bn economic output. Prices across residential real estate have more than tripled since 2000, according ton the HassConsult Property Index. Average prices across Nairobi have all more than doubled over the past decade, rising 20% from $224,000 to $278,000 between 2009 and 2013. High-end properties have tripled their value since 2002, earning Nairobi the top African city position in the 2013 Knight Frank Prime Global Cities Index. Prices peaked at approximately KSh53m ($604,200) in the second quarter of 2013, according to HassConsult, clustered in Nairobi’s west and higher-end suburbs, such as Gigiri, Hill View Estate, Karen, Kitisuru, Kyuna Estate, Muthaiga, Nyari, Rosslyn and Spring Valley. During the country’s rebasing-replacing of the old base year used for compiling the constant price estimated to a new and more recent base year, Kenya’s GPD increased to 55.2 billion US dollars in 2013 from 44.1 billion US dollars, a 25.3 percent jump. The real estate sector contributed 5.9 percent accounting for some change in the level of the country’s GDP.

South Africa is now the second largest economy in Africa ($341.2bn). Johannesburg is the financial and economic centre of South Africa. Gross rental yields, i.e., the gross rental return on a property if fully rented out, on Johannesburg apartments are good ranging from 5.82% to 8.45%. Demand for houses in Cape Town’s City Bowl has resulted in the luxury end of the market growing 1444 MIKE TUINSTRA – MARKET

RESEARCHER ISG