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10 opportunities that make Africa the ‘final frontier’ for property investors
September 17, 2015Article by Clare Moorhouse
In the wake of President Obama’s recent visit to Africa, many have taken note of an increased emphasis on Africa’s role in the global economy. It is, without question, one of the fastest growing regions in the world, and the market is ripe for investment. IMF GDP growth forecasts for 2015-2016 make for very interesting reading, and indeed, paint a very promising picture of Africa’s growth prospects: expanding population, rise in foreign investment and nine of the world’s fastest growing economies located in Sub-Saharan Africa.
So is Africa’s growth potential ready to be unlocked? We’ve identified ten opportunities for property investors that prove Africa is ready to deliver on its promise, and is indeed the ‘final frontier’:
1. Double population growth expected
Africa’s population is expected to double over the next 25 years, the fastest growth rate of any continent. According to Knight Frank’s Africa Report 2015, by 2100 nearly 40% of the world’s population will live in Africa. This rapid increase in population will cause a huge disparity between supply and demand for housing.
2. Youngest population in the world
According to the World Bank, Africa’s median age was 19.7 years in 2012 and is expected to increase to 25.4 years in 2050, making it the continent with the youngest population. With this, comes a boom in consumerism, bringing about both opportunities and challenges as the working-age population grows.
3. Political stability
Increased political stability on the continent and participation in local partnerships will continue to ease investors’ concerns. Uganda, for example, has experienced political stability and continuous economic growth for nearly 30 years. With neighbouring Kenya, Tanzania, Burundi and Rwanda, it has created the most advanced international political group in Africa and is benefiting from free trade between member countries and co-operation on major infrastructure projects, including the planned high speed link from Mombasa to Uganda.
4. Huge housing shortage
Rapid urbanisation and rising income levels due to robust economic growth has created significant demand for residential property across Sub-Saharan Africa. According to the Uganda Bureau of Statistics, Uganda is facing a current housing shortage of 550,000 units, with 100,000 of these in Kampala alone. With the population expected to increase from 38 million to 63 million by 2030, current estimates project a housing shortage of close to 8 million units in 20 years’ time, with 1 million of those in Kampala.
This disparity in supply and demand for quality accommodation in Uganda presents an exciting and lucrative opportunity for both developers and investors.
5. Sustained economic growth
Much of Sub-Saharan Africa has been experiencing strong economic growth. In Uganda alone, the economy grew by 5.3% in 2014 and is forecast to grow by 5.8% in 2015/2016. This is producing significant demand from multinational corporations, local businesses, start ups and consumers for high-quality commercial real estate.
To add to the success story, oil has been discovered in Uganda in significant quantities, and will give rise to the requirement for office space and oil refineries which will therefore create a ripple effect on other areas of the economy.
6. Rapid urbanisation
Urbanisation is occurring faster in Sub-Saharan Africa than anywhere else in the world as migrants move from rural to urban settlements. The real estate sector will play a major role in shaping Africa’s urban future, as city infrastructures develop and demand for low and middle income housing increases.
7. Expanding middle classes
Africa’s rapidly expanding middle class is attracting overseas investors looking to capitalise on this growing market. Studies* suggest that within the next decade, the number of middle class households across 11 Sub-Saharan African countries are expected to boom in the next 16 years from today’s 15 million to over 40 million by 2030.
(*Source: Standard Bank, South Africa August 2014)
8. Wealth of natural resources
Across the continent, new discoveries of oil, natural gas and minerals are promising to completely transform national balance sheets. This is leading to the need for further infrastructure – in transport routes and hubs, energy power stations and telecommunication networks.
With a wealth of oil, natural reserves and vast amounts of land for agriculture, the continent will likely play a greater role in providing growing global oil and gas consumption. The continent holds one third of global mineral reserves and one tenth of global oil reserves, and produces two thirds of the world’s diamonds. (Source: PWC Future of Africa report 2015).
9. Rise in technology
Technology use is expected to increase rapidly across the continent in the coming years, according to McKinsey & Company. In 2013, 67 million people in Africa used smartphones and 16 percent of the population was online. By 2025, the report projected, Internet penetration will reach 50 percent. That’s 600 million Internet users using 360 million smartphones.
As a result, emerging Technology, Media and Telecom (TMT) companies will urgently require office space, and housing, with good levels of connectivity.
10. FDI has reached highest level
Africa’s share of global Foreign Direct Investment (FDI) has reached the highest level in a decade, according to the Executing Growth, Ernst & Young Africa Attractiveness Survey. The study found that two of the main drivers of investment in Africa were a growing middle class and increased urbanisation, both of which support investment in real estate.
There are many opportunities that prove Africa is a continent ripe for investment. That’s why we’re offering a range of luxury apartments in Uganda, offering yields in the region of 15% NET. To find out more about this exciting ‘frontier’ market that’s offering high-yielding opportunities, contact our Investment Team on +44 1865 202 700.