Africa’s Imminent Real Estate Boom: Driven by the Growing Middle Class

The term ‘Africa Rising’ is attributed to Africa’s fast-growing middle class. The growing size of the middle class on the continent is a result of constant economic growth coupled with high population growth rate.

Google defines the middle class as ‘the social group between the upper and working classes, including professional and business people and their families.’ This is the class of people in the middle of the socioeconomic hierarchy.

A study by EIU Canback (a management consulting firm based in Cambridge, Massachusetts, United States.) indicates that 90% of Africans fall below an income of $10 a day. However, the proportion of Africans in the $10–$20 middle class (excluding South Africa), rose from 4.4% to only 6.2% between 2004 and 2014. Over the same period, the proportion of “upper middle” income ($20–$50 a day) went from 1.4% to 2.3%.

A similar study in 2014 by the German Development Institute revealed that the middle class of Sub-Saharan Africa rose from 14 million to 31 million people between 1990 and 2010.

A research by the Asian Development Bank in 2011 on the Role of middle class in economic development found out that;

• The mainly contribution is in the form of human capital.
• There is a higher rate of saving in the middle class.
• High consumption growth (lifestyle changes) is linked to the middle class.
• Strong middle class is likely to lead to long-run development.
• The expansion of the middle class drives sustainable economic growth.
• The middle class is more inclined to pursue entrepreneurial activities that may create employment and productivity growth.

A closer look shows that the majority of Africa’s middle class lives in cities. And while this group is growing in many of those cities, the situation is usually different from country to country. As people move from rural to urban lifestyle their income seems to double.

There are two thing most common things the middle class buy; a car and a house. They have grown up in a home without a car and seen their parents not affording a house. They have seen the burden of caring for their old age parents who do not own a house and on the other hand they receive no tangible assets as inheritance.

Their aim now is to change the narrative by owning a paid-off house before retirement. It can eventually become a source of income and they can pass on to their children, living a legacy. An opportunity to owning a property is something their parents and even forefathers have never had. It’s an opportunity they will not miss.

The constant economic growth in Africa is lifting the standard of living resulting in a large middle class. It is this progressive class that is contributing greatly to the growth of the real estate sector.

Next time we will conclude with ‘Africa where to now.’