Africa’s Imminent Real Estate Boom: Driven by Constant High Economic Growth

Economic Growth is defined as an increase in the amount of goods and services produced per head of the population over a period of time. This can be measure using a number of economic parameters.

African economies especially in Sub-Saharan are among the fastest growing in the world. This has been the rend for the past two decades as the number of conflicts in the continent is decreasing and the continent is becoming more democratic.

According to the IMF, as a continent, Africa’s GDP growth was 3.8 percent in 2018 and is projected to reach 3.9 percent in 2019, and further to 4.0 percent in 2020. On the other hand, for the same period, the figures for Europe and North America are between 2 percent and 2.5 percent.

The IMF listed top 10 fastest growing economies in 2018 worldwide as follows;

1. Libya – 10.9%
2. Ethiopia – 7.5%
3. Côte d’Ivoire – 7.4%
4. Bangladesh – 7.3%
5. India – 7.3%
6. Rwanda – 7.2%
7. Senegal – 7%
8. Cambodia – 6.9%
9. Lao P.D.R. – 6.8%
10. Djibouti – 6.7%

From the above six of top ten economies which grew the most in 2018 are in Africa. And for the past decade there was hardly less than 4 African countries in the top ten fastest growing economies worldwide.

This high growth trend is expected to continue in 2019 and beyond. Here are a few points to note on Africa’s high economic growth rate;

• Post conflict countries tend to be followed by rapid economic growth as the economies recover from the depression caused by conflicts. There is more direct foreign investments and donor funds that boost the economies. For example, Rwanda and Libya are experiencing high economic growth that is linked to post conflict trends.
• In times of economic boom business is good. And companies are expanding their capacity by building new or larger business facilities, industries, factories, warehouses and offices. This is creating high demand of commercial real estate and more opportunities for development.
• High economic growth is resulting in African governments having more money (as the revenue collection increases) to spend on infrastructure development. This in turn is unlocking real estate development.
• The general public is now having more income through better income and more jobs being created hence they are having more buying power and the ability to develop their personal properties and even invest in property.
• Because the public have more disposable income than before, commercial centers are growing to meet the growing demand for goods and services resulting in more and bigger shopping malls being built.
• The increased investment in physical capital such as factories, machinery, and roads are lowering the cost of production and increase productivity. This higher productivity is increasing output. For example, more improved transportation systems are reducing inefficiencies in moving raw materials or goods across the countries, and the overall effect is increase in GDP.

Although Africa is generally underdeveloped with pockets of serious levels of poverty, the general trend is that the stand of living is getting better each year with the economic growth. This creating tremendous growth in commercial, industrial and residential real estate opportunities at a level that has never been witnessed before in the continent.

Next time we will look at how the growing middle class is driving Africa’s Real Estate boom.