AFRICA’S RESIDENTIAL REAL ESTATE MARKET
The growth in Africa aligns with the expansion of the African residential real estate market, evidenced by an annual GDP growth of 3.6% and a population expansion of 2.3% as of 2022.
This is driven by factors such as the continent’s rapid urbanization, the expanding middle-class demographic, rising foreign direct investments, and a steadily improving business climate. The pandemic has led to a significant shift in the residential real estate market, with remote work becoming the norm.
This change has created opportunities for businesses to adopt permanent remote or hybrid work setups. Africa faces a massive shortfall of at least 51 million housing units as of November 2022 due to a lack of affordability, inflation, and the cost of residential rent.
Rents in Lagos have gone up by 22% since 2019. Metropolitan areas in South Africa, like Cape Town, have seen a 13% rent cost increase.
WAEMU RESIDENTIAL REAL ESTATE MARKET
The WAEMU zone comprises 8 countries, namely Benin, Burkina Faso, Cote d’Ivoire, Guinea Bissau, Mali (transition country), Niger (transition country), Senegal and Togo (transition country). It covers an area of 3,509,600 km2 and has a population of approximately 131 million (2020) with 40.8% living in urban areas (2020) and 47.1% living on less than USD 1.9 per day (2020) according to the IMF.
Residential real estate is fast growing as the region is undergoing substantial population growth (3.1% growth rate annually) and a positive GDP growth outlook (4.2% in 2024). The urbanization in WAEMU, fuelled by economic opportunities and improved living standards, increases the demand for urban housing.
Additionally, WAEMU is becoming increasingly appealing for investment in residential real estate due to a growing need for housing. However, the housing market faces several obstacles: land registers are not always reliable; most of the informal sector does not have access to housing loans granted by commercial banks, which require the domiciliation of salaries as the main form of security.
Affordable housing presents a significant challenge in the region, with fewer than 7% of households able to afford homeownership in 2022 and expanding at an annual rate of 7.5% to 10%. The housing deficit is currently at 3.5 million housing units and would require 800,000 additional units per year to absorb the deficit as of 2022 (a significant part of this shortfall is concentrated in Senegal with around 320,000 housing units). Even though the drop in housing loan rates (from 9.8% in 2005 to 5.2% in 2023) facilitates access to loans, the share of housing loans in new bank loans remains low (1.7% in 2018, 1.9% on average between 2013 to 2017). Commercial banks grant only 15,000 housing loans per year, which is a tiny fraction of the total needs.
WAEMU shows the potential for strong returns as it evolves into an attractive market for high-yield residential real estate, with Ivory Coast and Senegal exemplifying this growth trend. From 2017 to 2022, both Ivory Coast and Senegal have seen substantial growth in their residential real estate markets. Ivory Coast’s residentialreal estate value increased from USD 203.1 billion to USD 277.5 billion, and Senegal’s rose from USD 156.7 billion to USD 216.1 billion during this period, showcasing a favourable appreciation trend.
Transaction volumes also expanded significantly in both countries, with Ivory Coast increasing from 1.47 million to 1.68 million and Senegal from 0.65 million to 0.78 million. Furthermore, residential real estate unit sales showed strong demand, with Ivory Coast climbing from 30.47 thousand to 43.37 thousand, and Senegal increasing from 13.45 thousand to 20.28 thousand, offering a compelling rationale for anticipating a high rate of return on investments in these thriving real estate markets.
Lastly, investing in residential real estate within the WAEMU region offers a unique opportunity for portfolio diversification. Diversifying across countries and property types helps mitigate risk, leading to a more resilient and stable investment portfolio
Africa is in a unique position concerning its real estate market. While most other parts of the world have undergone extensive urbanisation, Africa is on the verge of starting this transition. The World Bank projects Africa’s population to rise to 2.4 billion by 2050, unleashing an abundance of real estate investment opportunities in the continent.
Real estate crowdfunding has the potential to play a transformative role in the African real estate market. Here’s how real estate crowdfunding can benefit the African market:
- Access to Capital: Africa faces a significant challenge to overcome in the way ofsecuring funding for the expansion of its cities. Real estate crowdfunding platforms can attract both local and international investors, channelling much-needed capital into African projects.
- . Inclusive Growth: Real estate crowdfunding can promote inclusive economic growth by allowing a wide range of investors, including those from the African diaspora, to participate in the development of the continent. This inclusivity can stimulate economic development in the continent.
- Mitigating Risk: Investing in African real estate can be perceived as risky due to political instability and uncertain regulatory environments in some countries. Crowdfunding platforms can help mitigate these risks by conducting thorough due diligence on projects and offering diversified investment options.
- Infrastructure Development: Crowdfunding can support the development of critical infrastructure in Africa, such as affordable housing and renewable energy projects, addressing pressing societal needs.
CONCLUSION
The African residential property market is booming due to factors such as rapid urbanisation, the growth of the middle class, increased foreign investment and improving business conditions. The COVID-19 pandemic has also fueled growth, with remote working becoming a new norm. However, Africa faces a significant housing deficit that requires innovative solutions.
In the UEMOA region, population growth and economic development are driving growth in residential property, despite challenges such as unreliable land registries and limited access to mortgage finance for the informal sector. Nevertheless, the region offers investment opportunities with high returns, as Côte d’Ivoire and Senegal demonstrate. The diversification of countries and property types within the UEMOA offers a chance for portfolio diversification, contributing to a more resilient and stable investment portfolio. Overall, these markets hold promise for those who can navigate their evolving landscape effectively.
