Property

Unleashing Investment Potential In Africa

Unleashing Investment Potential In AfricaAfrica creates life once more, but this time in its myriad property markets
Africa is easily the most, if not misunderstood, misrepresented and bizarrely perceived place in the world (The Economist once called it “hopeless”). Accounting for upwards a quarter of the Earth’s land mass and 15 percent of its population, Africa remains cursed by ignorance, cliché (let’s drop the “heart of darkness” references) and misperception (look at how small it often still is on maps). Yes, it has its share of conflict, but Eastern Europe managed to avoid being defined by the Balkan War. Africa deserves the world’s attention — and it’s starting to get it.

Sleeping Giant
The people of Africa’s 54 independent states are among the youngest in the world, living in resource-rich countries. Poor planning, education and infrastructure, corruption and lingering negative effects of colonisation have kept Africa from blossoming fully, though things are slowly changing. Various Chinese firms have invested heavily in Africa recently (to the detriment of African wildlife and labour relations some say) and China now leads the world FDI into Africa.

“African economies have grown impressively since the turn of the millennium. A continent that has long been associated with poverty is now increasingly talked of in terms of its economic dynamism and burgeoning wealth,” began Knight Frank in its 2013 Africa report. Since 2000, the GDP has averaged 5 percent growth per year, with Zimbabwe (just over 11 percent), Mozambique (almost 10 percent), Zambia (almost 8) and Nigeria (just over 6) among the leaders for projected growth to 2017.

Africa’s potential wealth is in its resources, burgeoning financial services and continued tourism (African wildlife is like no other in the world) and it is spread out across the continent: oil in the west (such as Angola and Nigeria), copper in Zambia, diamonds in the Democratic Republic of Congo, manufacturing in South Africa and mining almost everywhere. But the slow realisation by foreign investors and businesses that it is impossible to treat the continent as one entity in addition to the rush for its commodities that have spurred the real estate sector and kick-started property investor interest.

GDP of the Future
The mobile communications boom in Africa, which is cheaper and easier to implement, has opened up the economy to an unexpected degree and dragged the IT industry along with it. “The growth of Africa’s technology sector is creating demand for office space, from occupiers including large multinational IT companies such as IBM and Oracle, as well as African telecom giants including MTN and Kenya’s Safaricom,” said Knight Frank, noting that the so-called mobile revolution has been a catalyst for access to information and services and has served as something of a GDP highway. As a result, the office market is booming. Prime office rental rates in Luanda (Angola) are higher than those in London, Hong Kong or New York (roughly US$150 per square metre per month) with Lagos and Abuja in Nigeria, Algiers, Algeria and Cairo above US$50. A growing middle class is also helping to attract investors.

Still, varied locations have varied appeal, from individual buyers looking at holiday homes or rental properties for growing cities. “Political stability [in Namibia] is unrivalled in Africa,” begins Pierre Hollander, manager of Pam Golding Properties Namibia of the country’s charm. Economic stability and the strategic, modern port at Walvis Bay have put it on investor radar. Currently, one- to three-bedroom apartments priced around NAD1.5 to 3 million (HK$1 to 2.2 million) in Windhoek, the capital, sell quickly. “There’s great value for money to be had in Swakopmund, around NAD1.2 to NAD1.6 for a home or two- or three-bedroom apartment,” he adds.

South Africa has been a favourite holiday home location for decades, political faux pas or not, and Cape Town is as glamorous as any spot in Europe. “The Atlantic Seaboard is a prime location for both South African and international ultra-rich buyers, particularly residential properties positioned high up on the mountain in Nettleton Road in Clifton, in Bantry Bay and Fresnaye, as well as the V&A Waterfront,” explains Basil Moraitis, PGP area manager in South Africa. Unique, iconic home sales in the area have topped ZAR100 million (HK$72 million).

Kenya (fast shaping up to be Africa’s technology hub) has been in the news for all the wrong reasons lately, but PGP Kenya sales and operations manager Shafana Rajani-Kanani sees the violence as affecting the country’s coastal tourism, not its property market, which is relatively strong despite high interest rates that keep potential buyers as renters. Yet, “Sales prices are expected to rise further, due to demand heavily outweighing supply and a growing middle segment. Rental investors are holding back on investments, although it seems to currently be an attractive market for developers and land speculators,” Rajani-Kanani says.

Warm Welcomes
Africa needs investors and so purchasing in most places isn’t nearly as complicated as would be expected. Hollander points out that unless a buyer is looking at agricultural land, there are no restrictions for foreign buyers in Namibia. In Kenya, “It is not very difficult for an international investor to buy property as the principal requirement is the acquiring of a PIN certificate which is facilitated by the local … Kenya Revenue Authority. The only restriction is that a foreigner can only own property for a maximum of 99 years on leasehold, which is renewable,” adds Rajani-Kanani. And South Africa has a well established legal infrastructure that has no restrictions on non-resident buyers and clear, transparent titling.

Outside of South Africa, property investment is still in its infancy even if it is growing fast. Knight Frank concluded its report on an optimistic note, acknowledging both great potential and pitfalls. South Africa will remain a gateway, Botswana and Namibia will remain low risk alternatives and the rapidly growing cities of Kenya, Angola and Nigeria the likely hotspots. As Knight Frank stated in summary, “The long-term growth outlook for Africa appears bright. With a large and growing, young and increasingly wealthy population, Africa has a demographic advantage that few other parts of the world will be able to match over the coming decades.” Time to add an A to BRIC.