How to invest in real estate in Africa

real estate in Africa
investing in African real estate

It always seems to be a great idea to invest in real estate in Africa. It is an asset whose value appreciates year after year, and whose investment return is solid. As a landlord, investing in Africa’s real estate also guarantees you a fixed and sustainable income. Here are some useful information and advice for those who have chosen to embark on real estate investing in Africa. 

What are the most attractive cities for real estate investors?

In the development phase, Africa today has hundreds of cities where it could be tempting to invest. However, each city’s potential isn’t the same from one country to another. It is therefore crucial, to stay vigilant and know the local real estate market well before we invest in it.

Status-Quo

The real estate market is booming in Africa and attracts many new investors each year. Indeed, it is a sector that promises a high rate of return. Because of the saturation of the sector in their country of origin, Western investors but also Asian investors are rushing to enter the African real estate market.

This interest can also be seen in the fact that Africa is a continent where there are still extremely vast unexploited areas. On a price per square meter basis, Africa is also much more affordable than Europe, or Asian. See square meter price range per continent according to Numbeo

  • Africa: Between 770 USD to 3.660 USD per Square Meter in the city center
  • Western Europe: Between 3.660 USD to 12.200 USD per Square Meter in the city center
  • Easter Asia: Between 7.500 USD to 31.000 USD per Square Meter in the city center

Some countries with high potential

The extent of unoccupied land combined with the population growth estimates on the African continent almost assures that a real estate investment in Africa is almost guaranteed to yield profit, provided you buy right. The continent still has a strong capacity for appreciation if we compare it with Western countries and some Asian countries where good acquisitions of real estate have become difficult to find.

In addition, with investors’ interest, some African cities with strong economic potential will see increased population growth by 2030, according to reports from the Oxford Economics agency. Among them, there is:

  • Lagos in Nigeria. Population: 21m
  • Cape Town in South Africa. Population: 4.6m
  • Cairo in Egypt. Population: 9.1m
  • Kinshasa in the DRC or the Democratic Republic of Congo. Population: 14.3m
  • Luanda in Angola. Population: 2.5m

If you want to invest in real estate in Africa, make sure to spend some time understanding how safe is the country you wanna invest in. And if you need a bodyguard.

10 cities with great potential

Beyond the above-mentioned cities which are perceived by investors as real estate windfall, 10 other cities are currently particularly targeted. They are considered to be the most profitable on the continent, and where investment is most attractive. 

Antananarivo, Madagascar’s capital, is seen at the top of this list as the city where the rate of return is the highest in Africa today. The return rate in this city is 14 percent, tied to Angola’s city of Luanda. However, if you want to invest in professional real estate, Antananarivo is much more beneficial, showing a return rate of 13% vs. 12% in Luanda, and 12% in residential real estate vs. 11% in the Angolan city.

Real estate Africa. Source: pexels

We find Bamako, Lilongwe, and Kinshasa in third place. They are more or less the same in terms of return on professional and residential real estate with 12 percent profitability in office property. With the exception of Lilongwe where profitability is somewhat lower.

Then you have the towns of Kigali, Nouakchott, and Malabo where you can expect a return of up to 10 percent in office real estate. And finally, all real estate sectors combined show rates of return between 7.50 percent and 11.5 percent in Tunis and Cairo.

What about the residential market?

With regard to high-end property, residential properties are particularly popular in the suburbs of Africa’s major growing cities. Several countries and cities are currently embarking on large-scale residential high-end projects where the investment of your money is interesting. For example:

  • Eko Atlantic, in Nigeria
  • The Tatu City residential project also exists in Nairobi
  • La Cité du Fleuve project in Kinshasa.

The development of these projects is primarily a consequence of improving living standards in certain African cities. In this case, the demands for high-end residences are flowing and the offers can only follow that trend.

Our advice for investing well in real estate on African territory

Investing in Africa and hoping to reach the rates of return announced above is every investor’s goal. But you also need to know how to invest your money before you get there, too. Here are some tips to help you in this direction before you buy real estate in Africa.

Location, location, location

In Africa or elsewhere, the first rule in real estate investment is to choose a property that’s well located. By acquiring a property in a prestigious setting, a significant added value is sure to be achieved over time. You will have no risk with regard to the occupancy rate of the premises, the tenants will always be present to answer.

It is necessary, however, to be prepared to put the purchase price there a little, and to envisage arrangements for the good. Before you embark on it, however, you must always inform yourself and know the current projects around the place where you wish to invest.

Which type of good to choose?

It is possible to be tempted to invest your money in prestigious properties and high-end villas to invest in real estate in Africa. If the attendance rate of expatriates, senior officials as well as senior executives in the company is high in the industry where you want to invest, that may be a good idea.

It’s recommended, however, that you target good profile tenants and or senior tenants who are in general more reliable. With very high demand, that target is bigger. By choosing this niche, you don’t risk having an unoccupied room for a given period.

Pay attention to the quality of the building

In Africa, buying a building that is ready to live in is recommended, and can be rented quickly. Before making the purchase, though, you need to think about making a good technical diagnosis of the property and determining the costs that will be spent on restoring the building in advance. The quality of the building is a key element if you want to make sure that the house of building you buy is “recession-proof”.

At the same time, calculate the repair time and the monthly revenue expected to avoid wasting time and money. You may also need to take an architect on a visit to the site to get an idea of what to renovate.

When to invest in real estate in Africa?

It is however a matter of seizing the opportunity to invest in real estate in Africa. When you see a good niche, you can get started at any time. Like in all investment rules, however, you need to be on the lookout for the market and know when the market selling price is at its lowest. Wait, then, for the price to give way to its peak.

Avoid impulsive acquisition

In real estate investment, there’s no point in letting your impulses and emotions carry you away. Before embarking on an acquisition it is always important to do a study and analysis of the property’s environment. You also need to know how to project yourself into the future to know your target requirements.

If you rather think that real estate is too much trouble for you, it is probably better to start small and focus on index funds at first to build up your wealth.

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