CBRE expect that the African real estate market in terms of development, rents and investment appetite, will begin to experience its next wave of anticipated growth over the next 3 – 5 years. The view is a product of a recent roundtable breakfast hosted by CBRE (leading global real estate adviser) and DLA Piper (multinational law firm), where the duo published a summary of the topic discussions that included explanations of current challenges that African real estate markets are facing, recommendations, as well as views on the trajectory of the market over the next 5 years.
As the graphic below shows, the full view is that investors should be preparing their market strategy over next 12 months while the market endures through this negative growth spurt. As it rebalances over a 1 – 3 year period, investors should be positioning by buying land, preparing permits and where the opportunity is attractive enough (e.g. sufficient pre-lets), selective development. Finally in 3 – 5 years, when the anticipated growth returns, they roll out their investment strategy and execute.
Speaking on the level of improvement in the environment for real estate investment and development, the long-term view regarding ease of doing business is apparently still a positive one. The jurisdictions that are most likely to ‘rise up the ranks’ are those that focus on removal of the common barriers relating to:
- Currency and foreign exchange;
- Transparency of title;
- Ease of establishing local partnerships;
- Adaptability and accessibility of local market practices.
In Kenya for instance, government backed preregistration services have significantly cut the time needed to start a new business.
On the detrimental effect that lower oil and commodity prices have had on demand and property prices in many African countries, the summary rightly indicates that the volatile market place is encouraging a more long-term approach than the previous focus on rapid repatriation of dividends.
While several short to medium-term challenges remain, including currency fluctuations, global political uncertainty and immature financial and planning structures, opportunities exist and a period of limited short-term growth may offer investors the opportunity to formulate strategy for the period beyond.
Download the report on the Real Estate Research Report Centre.