According to a report by the global specialist Knight Frank titled “Africa Report 2020-2021”, real estate investments in Africa will rise by 5% compared to the last ten years.
The Knight Frank’s Report 2020-2021 in collaboration with the World Bank and the IMF, announced a 5% increase in investments in the real estate sector in Africa between 2020 and 2021. This growth involves the renting sector through the renting of office space and residences, which represent each 2.5% of the global growth of real estate funds in Africa.
The reasons that account for this increase are because: Firstly, the real estate sector has experienced innovations with the coming of key technological tools. These include among other Protech, known under the name “Property Technology”. According to the Knight Frank report, investments in the development of Protech reached globally $12 billion in 2016 as against $20 million in 2008. Even if it dropped by $4.6 billion in 2019, it still remains a very high figure compared to the amount in 2008. The same report states that Protech enterprises in Africa represent 1% of world market. The World Economic Forum on its part states that Protech is transforming the world of the real estate sector in three ways: it promotes greater transparency; enables an increase in efficiency; and encourages a shift far away from traditional uses in the sector. Another technology in real estate in Fintech, “Finance Technology”, which enables bank operations between geographic zones: a case between the diaspora and Africa through distant bank operations. The last technology in the domain is the Contech “construction Technology”. This one is known for the least digitalised real estate technology, which helps to rationally manage works in the building construction and public works sector.
A Growing Population
The growing population also constitutes a key factor to the growth on investments in the real estate sector, experienced through the migration of people from the outskirts to the towns and the birth of satellite towns (Towns closest to urban centres). The United Nations explains that in Africa, the young population which represents the average class should increase from 355 million persons in 2010 to 1.1 billion youths in 2050.
Finally, there is the economic factor, with the increase in GDP and the increase of jobs. Visibly, the African Development Bank estimates the gross Domestic Product of Africa in 2021 at 4.1%. They also reveal that real estate investments will continue to increase to more than 50% in 2021.
Despite this significant growth, the real estate sector in Africa still faces problems. 17 out of the 54 countries in Africa for example experience a deficit of more than one million houses. According to the Knight Frank Report, the housing shortage is actually estimated at 22 million units. In order to solve this shortage, the country must build more than 700 000 houses every year for eight years. On the other hand in countries like Kenya, Madagascar, Mozambique and South Africa, the housing shortage is evaluated to be less than 2 million units.
The Double Edged Sword of E-Commerce
Other problems faced by the real estate market are: Firstly, the real estate sector is facing a competitive challenge. Real estate companies that sell online face competition from other online selling commercial enterprises like Jumia, Kilimall and Mall of Africa. However, online selling in general has some positive perspectives. In this light, McKinsey believes that online sells in Africa will generate $75 billion by 2025. This growth thanks to E-commerce is attributed to the growth in mobile use and internet which are expected to reach one million mobile connections in 2024 and a penetration rate of 50% of the number of subscribers in 2025, still according to McKinsey. The Global System for Mobile Communication Association (GSMA) on its part believes that the total number of smart phones and connections will rise to 700 million by 2025 in Kenya, Nigeria and South Africa. Secondly, urbanisation is a threat to the development of the real estate sector in Africa. On this subject, African governments are working to create satellite towns so as to reduce the pressure on existing urban centres. Governments are also focusing on private sector interventions to solve the housing problems in the continent.
Even if Africa at the moment is facing many obstacles, future projects have already been established. According to the World Bank, Africa needs $1.4 million funding to meet the continent’s housing shortage. Some countries have improved the affordability of housing. Affordability here means the ability to have convenient and adequate housing for life. Visibly, the Knight Frank report states that in Egypt and in Tanzania, the affordability has been improved thanks the establishment of mortgages from refunding companies. Another strategy adopted by other countries is the construction of houses by 2025. According to the Knight Frank Research, Kenya has lunched the Big Four Programme whose objective is to construct 500 000 houses by 2022. In the same light, Ghana on its part has revealed plans to construct 250 000 homes annually for eight years.