African property, the next investment frontier - CNBC Africa

African property, the next investment frontier


by Philani Nyalunga 0

Antananarivo, Madagascar

According to the World Bank report, growth in Sub-Saharan Africa remains robust at 4.9 per cent. One of the spinoffs of this increasing stability in the region is a growing appetite from investors for real estate asset exposure in the African market.

The Economic growth seems to be the key driver of change in Africa. Standard Bank reports that the attraction of real estate across Africa lies in its development potential. But it is not without its challenges as investors soon found out that countries like Zimbabwe and Nigeria have been singled out.

“Zimbabwe speaks for its self. If you look at ownership of Farm agricultural property, a lot of it got taken away a few years ago. So for people who have prior to that invested a lot in agricultural land and in production capacity they lost a lot,” said John Loos Property Economist at FNB.

The Standard Bank report has it that the growth in GDP and rise of the middle class leads to demand for first grade shopping centres and office developments.

Nigeria has been identified as one of such African markets that will attract investments in shopping mall development but due to policy issues, the Nigerian market is inaccessible. Muktar Mohammed, Analyst at Assar Investments in Nigeria says that one of the biggest constraints is policy and certainty within the region.

Investors who are coming in to the region need some assurance that there will be some stability in policy making. Policies have to be adhered to for companies looking to expand their Business.  

Loos added that another challenge in investing in African property was the lack of knowledge of the target market. He further explained that South Africans were spoilt for choice because they had an Investment Property Databank which reports on the commercial property statistics, while Roader, FNB and ABSA focused on the residential property sites.

“There is a host of data available to us, to analyse the market on their performance, their returns and so on, but that is not always the case when one moves north,” he said.

Albeit Africa is the last frontier for growth as compared to the rest of the world. But Africa is the next investment frontier in the real estate sector with untapped retail potential in many countries. It is however said that investors must understand the context and policies to make it a smooth and profitable experience.