Africa’s Imminent Real Estate Boom: Driven by High Urbanization Rate

In Africa, economic opportunities are concentrated in urban areas and with the economic opportunities comes a high standard of living. Much of the residential and commercial property demand in Africa is concentrated in towns and cities.

African towns and cities are the economic growth points that attract local and foreign investment. These businesses require property to house their operations and their work force. Absence of these facilities usually results in the businesses being forced to get involved in building their own facilities and houses for their staff.

Urbanization is the process of making an area more urban. In Africa this is being achieved by several ways like;

• Rural to urban migration; as people seek better economic prospects and better quality of life. The fast-growing African economies are attracting more people to towns and cities. On the other hand, the high population growth keeps feeding the migration process to the urban areas.
• Rapid growth of rural areas that leads to reclassification of rural areas as urban. For example, rural villages are fast growing into towns, and settlements around mines are transforming into towns, and reclassified as urban areas.
• Natural increase of urban population. The is linked to the high rate of population growth through high birth rate combined with low mortality rate. Low mortality rate in urban areas is cause by improved standards of living and better health conditions.
• Expansion of urban settlements through annexation. This includes formalization of slums and informal settlements, and inclusion of peri-urban settlements into urban areas.
• At times negative events such as conflicts and disasters can cause massive migration of refugees into camps or areas that eventually be reclassified as urban as the settlements continue to grow.

The urban growth rate of Africa is almost 11 times higher than Europe’s. For the past two decade the size of Africa’s urban area has been growing at about 6 percent. As a result, the population of Africans living in cities grew from 80 million in 1983 to 540 million in 2019. This is 41% of the population of Africa of about 1.3 billion. It is expected that 60% of the population will be living in urban areas by 2050.

Mega-cities are cities with a population large than 10 million. At the moment Africa has 4 mega-cities; Lagos, Cairo, Kinshasa and Johannesburg. By 2050, at the current rate of urbanization, Africa is projected to have 24 mega-cities.

The high urbanization rate is putting huge pressure on the existing urban infrastructure and properties. The under resourced African governments are battling to cope with the ever-increasing pressure.

This growing urban population in Africa, especially sub-Sahara Africa, is rapidly driving up the demand for affordable housing in urban areas.

As the number of formal dwelling increase a proportional increase of services like roads, water and sewer is required. This triggers demand for adequate infrastructure, public services and commercial properties.

Besides improving the standard of living, a house is one of the most valuable assets a household can have. It can be used as collateral for borrowing funds to speed up commercial activities, and it can be passed across generations through inheritance. As people in urban area get access to economic opportunities, their economic well-being improves, and they seek to invest in a house as a stable asset. This in turn triggers further economic opportunities through construction and property development.

Next time we will look at how the infrastructure development rate is driving Africa’s Real Estate boom.