Executive Summary
The year 2022 saw events play out in the macro environment that triggered economic consequences for the rest of the world. The sustained Russian-Ukraine war and the resultant supply chain challenges, skyrocketing energy prices and, by default, high inflation levels precipitated the implementation of various monetary policies by Central Banks to stem the trend. The re-emergence of COVID-19 in some countries such as the USA, France, India and China and its implication on travel restrictions, work-from-home policies and, consequently, the hospitality and office real estate segments underlined the preceding year. Climate disasters peaked in Pakistan (flooding), the USA (hurricane Ian in the State of Florida), China (heatwave), Ethiopia (megadrought) and Spain (wildfires), with an unprecedented loss of lives, properties, and livelihoods. More than ever, the clamour for more sustainability-focused practices grew louder and set alight an urgent call for stakeholders to collectively work towards net zero emissions.
Across our 10 African countries of focus, namely, Nigeria, Kenya, Ghana, South Africa, Angola, Mozambique, Tanzania, Namibia, Tunisia, and Zambia, we saw these broad macroeconomic events significantly define the economic, social, environmental, and political landscape and by default, the real estate sectors. Existing demand-side challenges were heightened, such as high entry barriers to home ownership and the under-prioritisation and inadequate provision of social housing units. With average population and urban growth rates of 2.27% and 2.50%, respectively, across our 10 African countries and escalating housing deficits ranging from Tunisia’s estimated 135,000 housing units to Nigeria’s estimated 28 million housing units, inflation rates peaked at 50% in Ghana, 21% in Nigeria and 17% in Angola. Mortgage interest rates hovered around the 15% mark as a median score and 31% at the far end of the continuum for these already socio-economically challenged populations. Similarly, supply-side challenges persisted. For instance, infrastructure deficits across the board necessitated intervention funds from the World Bank and the African Development Bank (AFDB) cumulatively to the tune of $930 million, with the primary beneficiaries being Ghana, Mozambique, Tanzania, and Tunisia.
In our quest to dissect these multifaceted issues and consolidate the implications for the real estate sector across our countries of focus, six common themes came to the fore and have formed the basis of our analysis in this chapter:
Urbanisation and the Affordability Crisis: surveys key economic indicators and how a divergent demographic mix continues to shape the narrative around home ownership.
Climate Change and the Imperative for Sustainable and Resilient Cities: summarises the gaps in urban planning models and the opportunities for sustainable development.
The Expanding Diaspora Market: highlights the opportunity for optimising real estate investment flows by leveraging the ever-growing diaspora market.
The Challenge with Infrastructure Deficit: articulates the issues around infrastructure delivery and provides perspective on how a public-private sector partnership will accelerate notable development.
The Dominance of Technology: examines the growing adoption of technology, the quantum leap in the number of actors within the Proptech space and the implication for how real transactions will be consummated.
Economic Resilience Through Diversification: sets the tone for prosperity through economic diversification by analysing each country’s financial performance in relation to key sector contributions to Gross Domestic Product (GDP).
Having explored and analysed the key themes set to impact the real estate sector in 2023, our key takeaways and outlook for the year ahead are threefold:
- Supply-side real estate players will demonstrate a preference for high-growth segments due to persisting challenges in the economic landscape, with interest rates staying higher much longer than expected and increasing barriers to homeownership.
- We expect that the limitations around infrastructure delivery will continue to drive higher than usual input costs, thereby eroding developers’ interest in low-margin developments such as the low-income and affordable housing categories.
- We equally expect to see sustained growth in the Proptech space in 2023, with new ownership structures and alternative funding & investment channels emerging.
For more insights, research and analyses, download The Real Future 2023 on www.mixtafrica.com/therealfuture
