18 predictions that would shape real estate in Africa
A Property Investment Adviser Dr. Gad Asorwoe Akwensivie has made a number of predictions he says would shape real estate in Africa in the coming years.
Speaking at the plenary of the International Federation of Surveyors (FIG) Working Week 2024 at the La Palm Beach Hotel in Accra, on 22nd May, 2024, Dr. Akwensivie, a valuation and estate surveyor, legal practitioner and researcher, indicated that real estate in Africa is fast developing due to dynamics such as changing tastes, advancement in technology and access to finance.
He said, the forecast should guide the strategic decision-making processes of developers and provides meaningful insights that should enable practitioners, surveyors, valuers, architects, investors, developers, financiers, policy makers and estate agents to navigate into the future whether they are thinking about building homes for sale or going into mortgage to grow real estate empires.
Dr. Akwensivie said professionals who are informed would be separated from the rest.
Using time series analysis, Dr. Akwensivie predicts a big demand for condominiums, apartments and similar shared properties in the near future as the strategy by policy makers, governments and industry players to solve the housing demand/supply imbalance.
He said this will be driven largely by the growing middle income earners with smaller family sizes. According to Dr. Akwensivie, there will be a shift from private development to mortgage financing due to fluidity of global events, technological breakthroughs and financial market shifts. He envisages a dramatic shift away from private incremental development to mortgage and demonstrated a growing proportion of the industry in Rwanda, Egypt, Nigeria, Kenya and South Africa controlled by mortgage.
Dr. Akwensivie predicts that the introduction of new legislations on the built environment, (building codes, scaffolding, site safety measures, etc.) and their strict enforcement will restrict private incremental building. He believes this will increase the costs of private residential development and have the great positive impact for estate developers and investors.
Mortgage rates will drop: The good news for mortgage holders and aspiring homeowners is that, mortgage rates will be drastically lower than the current rates. Dr Akwensivie says the Governor of the Bank of Ghana for instance sees a strong case for adjustment in monetary policy favoring lower mortgage rates.
By 2030 mortgage rates will begin falling rates once it becomes confident that economic growth will pick up, unemployment will decline and inflation starts to move back. Dr. Akwensivie predicts that solar will be in very high demand.
He observed that already, a growing proportion of property owners are financing the installation of rooftop solar power. Dr. Akwensivie believes this would even be greater in the coming years and that developers would be incentivized to install solar and alternative energy storage systems as part of their packages. Dr. Akwensivie said, the solar idea makes a lot of financial sense because despite the huge initial outlay for solar panels and installation, a typical household would save substantial amount of money a year which they could use to pay off mortgages more quickly.
Online brands to rule the market: Dr. Akwensivie predicts that in the coming years, successful developers are those who will be able to build an online reputation of their portfolio and work. The reason why this will happen according to Dr. Akwensivie is that, property buyers and sellers will be looking online first to find contact information of developers to audit their credentials and footprint and advised developers to take advantage of this.
Dr. Akwensivie believes that buyers will be able to make informed decisions quicker about property and that the easy access to information will also hold real estate developers accountable and that the availability of information will help to distinguish between good and bad developers. Dr. Akwensivie predicts that there will be mass marketing by developers, investors and agents a phenomenon he says is already happening.
With the gradual domination of social media as the main tool for broadcasting information and messages, developers and brokers will have to invest some resources in building their online presence to remain competitive: Youtube, Whattsapp, Facebook. Linkedin, Snapchat, Instagram, etc. Buyers and sellers will be relying on these channels for viewing property. These will take the form of accessing information about the property, which could be anything from a video tour, photos, etc. Dr. Akwensivie said this will be one of the best ways to market a home in the not too distant future.
Among others, Dr. Akwensivie forecasts a future of specialization instead of generalization. Currently, real estate developers and agents are generalists, able to sell, buy, and build anything. But very soon he says the best developers and agents will have to differentiate themselves by specializing in specific segments of the markets as a way of being different. In Ghana we should expect to see more of the likes of Trasacco Estate Development Company that provides luxury home features for the up-market and Lakeside Estates for the middle market and so on.
On the demands of Generation Z, Dr. Akwensivie revealed that Africa already has the most sophisticated, refined, heterogeneous group of consumers – a new troop of Generation Z “I mean people born after 1995”, who will quickly be taking over. He added that globally, this generation is now leaving university and is expected to hit 2.56 billion individuals globally in the next 20 years. According to Dr. Akwensivie they will represent over half of the continent’s population by that time. These are people with a vast diversity of needs, financial situations and lifestyle preferences. Dr. Akwensivie informed developers that, they will have to be able to construct and market to meet the tastes and special needs of this group. Dr. Akwensivie also forecasts the rise in short-term rentals which will create opportunities for large property owners or the single family owners. Priorities he says, will range from renting a room occasionally for extra cash to renting entire vacation homes at three to five times the local price because property owners can access a global community of renters.
Dr. Akwensivie believes that the demand for smaller living tiny apartments and in a few cases mobile living will be a solution to increasing housing density in big African cities. This will become more of a norm and will drive up operating income on existing apartment stock. According to him, this likely won’t have a huge effect in 2025 but may be 10 years after when we will see many individual tenants in a single condo. Dr. Akwensivie predicts that, tax reforms will likely reduce ownership benefits.
Under new tax laws that would be in place, homeowners in 10 years from now won’t be enjoying the many tax benefits for ownership today. He said currently, property owners in Ghana for example don’t pay taxes such as rent tax, property rates, property gains tax, income and sales tax, etc. he envisages that, these tax holidays will be capped to a certain amount meaning that property owners will only be able to deduct a lesser amount than they currently do but added that the overall impact of new tax codes on the real estate market will become more clearer as time goes on.
Dr. Akwensivie predicts that the hottest properties will be in the south, along the coast: He said, the biggest increases in home sales are expected in the south and along the coasts. In Ghana, places like Sekondi-Takoradi, Cape-Coast, Sogakope, Ada, Winneba, Salt-pond, Elmina and Elubo will be the hottest places for property sales. He believes that in Ghana there will be sales growth of around 30 % or more for properties situate along the coast as against 15% inland.
Home price increases to slow: Dr Akwensivie predicts that property prices won’t rise as fast as they currently do. He said, currently properties appreciate as much as 5.5%. We can expect the rise in property price appreciation to slow in many of African cities by 2030 to about 2% maximum. Among all homes however, first time homes or entry level homes will experience the highest price increases he predicted. The oversupply fallacy: According to Dr. Akwensivie, an important topic that has entered the minds of investors, keeping them on the sidelines, is the fear of a possible oversupply of housing units in the near future due to investments into the sector. He said it is true that there will be production of new housing units but his colleague analysts agree with him that the quantity to be delivered onto the market will not be enough to ensure the equilibrium of the housing deficit until sometime 2060. This he says implies that the fear of an oversupply of housing is unfounded, especially given the population growth rate and immigration in Africa.
Office evolution: Dr. Akwensivie forecasts that office accommodation developers and commercial property owners will need to focus on providing not just space and a great location, but an environment for success. As office design transform, firms will be looking for configured office spaces that boost productivity. Developers who focus on market design and efficiency, and tailor their products to ever-evolving workplace trends (flexibility, smart office space), will benefit greatly. He advised developers to pay attention to that. Dr. Akwensivie believes that major cities like Accra, Lagos, Nairobi and Cairo will see mass exodus: He said, as these cities get crowded and busy and house prices keep rising, more locals will move out to other, quieter parts of the country.
This doesn’t mean that the cities will necessarily shrink by population or reduce in size to ease the pressure on house prices – NO! He said these cities will continue to grow due to births and foreign immigration. By then, because of improvement in communications technology and internet connectivity more people will have the option of living and working away from the city. Dr. Akwensivie predicts that the big game changer will be driverless cars.
He said this development will turn cars into mobile offices – allowing commuters to work on their phone and laptops while they are driven to work, and making it more practical to live longer distance away.
In his concluding remarks Dr. Akwensivie advised people to work with property professionals who understand the market dynamics and who can advise on processes and changes. Developers should look out for property investment advisors who consistently communicate feedback. Dr. Akwensivie indicated that the higher-end market will be well-served and that margins will still be good for those types of projects. He added that building affordable housing at scale, in urban areas would be profitable from 2035 and that the predictions provide meaningful insights that should help professionals navigate into the future.
International Federation of Surveyors (FIG) is the UN-recognized global organization for the profession of surveying and related disciplines. It was established in 1878, and formed as a legal entity in 1999. As of August 2012, FIG has 106 member associations from 88 countries including the Ghana Institution of Surveyors.
The International Federation of Surveyors (FIG) Working Week is an annual week-long celebration of innovation and collaboration that unites the global community of surveying and spatial professionals. It is a unique opportunity for professionals to bridge the gap between science and the policy with stakeholders who drive real-world change. The 2024 conference is being held in Accra, Ghana from 19th to 24th May and is being attended by over 1,500 surveyors and related practitioners from around the world focusing on how geospatial technologies and innovations as well as connectivity can become major tools in ensuring resilient environment and sustainable natural resource management for all.