African Investment - Property Investors Great African Trek
Investors are looking north to Nairobi, Ghana, Angola and Southern Africa for better returns
JOHANNESBURG – The African Real Estate Society (Afres) says South African property investors are increasingly broking property across the continent ostensibly following tenants like Pick n Pay, MTN, Checkers and Woolworths. The society’s presidentelect Francois Viruly says the focus is on shopping centres and hotels as the black middle class continues to grow. Property giants, JHI and the Broll Property Group have already made inroads into Africa. Most of the transactions have involved joint ventures (JVs) due to land tenure issues which usually involve long-term leases.
A lack of market information and transparency in the markets has in the past dissuaded investors from venturing into Africa. However, Afres is in the process of compiling a property market maturity index as a guide to how property markets in other parts of Africa are progressing. Viruly is also confident that an African property fund will be established within the next four or five years. He says that word on the street is that oil producing countries in West Africa are showing significant growth with some expected to reach levels of 7% growth in the next decade. “Those are the sort of numbers that we used to hear about China,” which is now one of the world’s fast growing major economies.
What is also prompting investors to contemplate the rest of Africa is significantly higher returns on investment. “I’ve seen examples of returns being twice what the investor is seeing in SA,” Viruly said. The other problem is infrastructure requiring investors to rely on generators and to repair roads which can be costly. Building costs are also high and there is generally a lack of property managers and brokers who have to make them work. “That is where the challenge will lie,” Viruly said. What is also important to remember is that the risk profile attached to a number of countries, both on the political and economic fronts have changed for the better making them more attractive.
Afres’ executive director, Akin Olawore, says opportunities abound across the continent. “’For instance, Nigeria needs an annual injection of 720 000 housing units during the next 20 years to meet middle income demand. These housing developments and the densification of African cities offer opportunities in the Nigerian retailing sector,” Olawore said. Afres is in the process of collecting country specific data that will assist investors in understanding the opportunities and risks associated with these markets.
Viruly says he believes South Africa is being overshopped and retailers are beginning to realise that growth lies outside of the country. Another advantage of investing in Africa is that many countries have been deleveraged quite strongly from the international markets enabling them to maintain their economic performance when things falter internationally. He says the challenge for South Africa is, can we get there soon enough, ie, before the Chinese?
Courtesy: The EAAB - Estate Agency Affairs Board
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