Five Stories That Characterize Africa’s Housing Markets in 2015

Published: Saturday, November 28th, 2015 by Kecia Rust

TinyCAHFlogoIf cities are built the way they are financed (Renaud, 1984), then Africa’s cities are set to change. Innovation in housing finance – in terms of products, players, and approaches, not to mention target markets – is a key feature across the continent, creating new opportunities for investment and delivery.

As both local and international investors chase growth opportunities in a sluggish global economy, they are employing diversification strategies to manage the risks of their traditional targets – and in this, residential property is increasingly becoming an option. And while established players are getting better at what they do, new players are adding to the mix and competing for opportunities.

Investors are faced with a paradox, however. By their very nature, they are drawn to the high income markets. It is in these markets that they can price adequately for risk and realize the returns they seek.

Price of the cheapest, newly built house by a formal developer in Africa. Source: CAHF Yearbook 2015.

Price of the cheapest, newly built house by a formal developer in Africa. Source: CAHF Yearbook 2015.

However, the real story – the scale opportunity just waiting to be cracked – is in the lower income market segments. The arguments for investment in residential – high urbanization rates, a growing middle class, a shortage of supply – these are all arguments for moving down market into the uncharted waters of affordable housing.

Can investors and developers do it? In 2015, this is a very real focus.

Five stories characterise Africa’s housing finance markets in 2015:

1. Innovation in financing

2. Growing awareness of the opportunity in residential

3. The identification of niche markets and an appreciation of the affordability challenge

4. Policy & regulatory evolution to match investor interest

5. Growing experience and investor sophistication

Of course, the challenges are not insignificant. But increasingly, investors and developers are noting that the potential benefits outweigh the risks.

And, as governments come to appreciate the potential that this interest offers, their efforts to streamline development processes and enable their local housing markets to grow are creating new opportunities that are beginning to change the face of African cities.

HOUSING FINANCE IN AFRICA, recently released, reviews Africa’s housing finance markets. Click here to read on.