Real estate in Africa is in demand

2015-03-19 08:16

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Africa’s young population as well as continued urbanisation will drive the demand for real estate on the continent.

This is according to a report released in Johannesburg yesterday by 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 GDP [income],” said Ilse French, the real estate leader at PwC, on the growth potential of the continent.

“More and more, investors around the world are seeing the growth potential of Africa, in particular its substantial demographic edge. Economic growth, improving political stability and ongoing investments in infrastructure are opening up a previously inaccessible market,” added French.

The report projected forecasts of 20% net annual returns from investments in shopping malls, office blocks or industrial complexes in countries across the continent to draw in new investors.

The retail sector is leading the South African property market. This is attributed to the rise in the country’s middle class, with an average disposable salary of $1100 (about R13 607) a month in the formal sector, which is rapidly growing.

South Africa is also included for the first time in the Global Real Estate outlook for 2015, also by PwC. The report provides insight into the current African real estate sector by focusing on the key markets through a series of interviews with leading players in the industry who provide their view and outlooks on the investment climate.

In the report, interviewees noted that the listed property sector in South Africa has shown excellent performance, with 26.6% total returns.

“The listed real estate sector in South Africa is now close in value to the corresponding sectors in Singapore and Hong Kong,” said French.

Interviewees also indicated that the size of available investments may not match the demands of larger institutional investors, who require substantial investments to enter the market.

But securing finance was not viewed as a problem, according to the report. However, elsewhere in Africa interviewees indicated that it was difficult for investors.

The report emphasised the importance of local partnerships in the country in which you are looking to invest in, especially if countries (such as South Africa) are looking at policies to cap foreign land ownership, French said.

“As real estate investors around the world are faced with the challenge of finding value and returns at a time when core property is becoming overpriced in almost all markets, Africa is now of increasing interest,” said French.

Here are five interesting statistics French shared:

» By 2035, Africa’s labour force will be larger than China’s.

» 67% of Africa chief executives see urbanisation 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 $1.4 trillion in 2020

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