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Africa’s property markets offer triple digit returns for liquid investors

By GAR staff on 01.05.2014.

The market for housing and other property in Africa is booming, and currently offers returns of as much as 200% in the right sector and country – the only limiting factor being a lack of investor confidence and liquidity, according to one architectural consultancy professional.

Kofi Smith, managing partner at South Africa’s Consult Three Architects, explains: “Africa is the last frontier and has attractive growth prospects, yet many infrastructure and property investors are not capitalising on what it offers as they are sceptical of the political landscape.”

“Rural retail developments have been a big area of focus in South Africa, and the private sector has been doing very well in real estate.”

He notes that the housing sector is very attractive as a result of both economic growth and a high influx of multinational companies, which has caused demand for affordable and middle-income housing to soar and driven big government spending on mixed-use developments.

“Rural retail developments have been a big area of focus in South Africa for example, as the country tries to rebuild previously disadvantaged communities to balance with that of urban areas,” Smith comments. “The main issue is and will always be equity.

“Government agencies are not spending a lot of funds on building basic infrastructure, and this is delaying development processes, but a small portion of the market, the private sector, has been doing very well investing in real estate.”

Smith cites Ghana as an example of a country that is booming, politically stable, and a place where returns on development cost can be particularly high, noting: “In South Africa, a profit margin in the region of 20-30% for the typical middle-income housing development would be considered successful, but in Ghana the profit margin can be between 100-200%

“Ghana does not have much of a credit system in place, but investors who go in liquid can make a lot of money, and the market is right for office and high-end housing developments,” he says, though in the retail sector he admits that it can be difficult to get the right land for a feasible price.

Two other countries that hold incredible latent potential for property development are South Sudan and the Republic of Congo, as these markets need to be ‘rebuilt from scratch’.

“While activity in South Sudan is largely on hold, I believe now is the perfect time for one to engage in opportunities in Congo Brazzaville, as it has become very stable,” adds Smith.

The advice is for investors to carefully understand the country or locale that they want to enter, and to form local partnerships in order to better understand each market, avoid approval delays and take advantage of the established networks that are set in place.

Consult Three Architects (C3) specialises in the careful research, feasibility and viability of real estate development opportunities in Africa, and will be speaking further on the subject as a sponsor at the Infrastructure & Property Development MEA Summit 2014 in Dubai.