
2022 is anticipated to be a record year for the African real estate market due to factors like rising foreign direct investment, changing occupier habits, and e-commerce. However, there is still a variance in market performance among the continent's major markets. The important sectors to watch out for in Africa's top markets are listed below along with the factors that are likely to have an impact on performance in these economies.
Egypt's real estate boom is anticipated to continue
In general, the pandemic has been good for the Egyptian real estate market. According to the Ministry of Planning, the industry expanded by 8% in 2021. Developers have noted that the local real estate market has remained stable for the first time in 15 years. A total of US$10 billion in sales were generated in the market in 2021, and further foreign investments of US$500 million contributed to the rising investor confidence in the sector.
The general real estate market across all sectors is one to watch out for in 2022 due to its stability across the property cycle, especially for core capital allocation. Particularly the residential sector is expected to grow very well thanks to rising foreign investments and falling interest rates that will encourage more investment. According to the Egyptian Businessmen Association, the sector is therefore expected to have stable demand as well as an increase in the number of completed units available.
Despite political and economic unrest, growth in the Nairobi real estate market is anticipated.
The third quarter of 2021 saw 5.2 per cent growth in the real estate market in Kenya. Compared to the 3.7 per cent growth seen in the same quarter in 2020, this constituted an increase Kenya National Bureau of Statistics. According to the Ministry of Lands and Physical Planning, the number of land transactions over the same period more than doubled from the 1,734 transactions registered in 2020, highlighting the return to market activity in the real estate industry. While this increased activity is anticipated to last through 2022, overall GDP growth is expected to decelerate to 5.9 per cent in 2022 from 8 per cent in 2021 as a result of currency changes and political unpredictability surrounding the impending general election.
With Nairobi's status as a regional hub strengthened by the opening of the Global Trade Center tower and the creation of the Nairobi International Financial Center, the prime office market will continue to be a crucial area to watch in the market. With large office parks like the Garden City Business Park posting occupancy levels above 90%, vacancy levels are expected to stay low due to the pent-up demand for premier offices.
New hotspots will drive Nigeria's real estate market's expansion.
In a period of increased market activity from December 2021 to December 2022, the Nigerian real estate market remained comparatively robust. However, important industries like the office and hotel sectors continued to be muted, with Grade B offices having vacancy rates as high as 36% and those in the former as low as 55%.
Nevertheless, we believe that the market will keep expanding, with industries like residential, logistics, and healthcare providing the necessary fuel. The residential sector, in particular, is expected to prosper best in 2022 due to rising demand and a shortage of supply. Furthermore, as infrastructure continues to expand, major developing hotspots are projected to emerge in places like Epe and Yaba that will outperform the total residential market. These neighbourhoods had an increase in demand over the previous year, and their overall rental yields, at 4.3 per cent and 5 per cent, respectively, have tracked the average market rate of 5 per cent.
Demand from investors will support Ghana's real estate sector.
The Ghana Investment Promotion Center reports that in 2020, the nation received $2.65 billion in foreign direct investment FDI, the highest sum in West Africa. The country recorded over $800 million in FDI during the first half of 2021, continuing this boom. With yearly yields averaging 10% across the retail, office, and industrial buildings, the real estate sector, in particular, continues to be among the most alluring industries.
Due to Ghana's "Year of the Return" program, which aims to attract investments from Africans residing abroad, this trend is expected to continue in 2022. Demand is anticipated to keep increasing across all sectors, therefore it is unlikely that headwinds like an increasing debt load and the associated downgrading of Fitch ratings to a negative outlook will dampen consumer confidence. Particularly the residential sector will be one to keep an eye on, supported by solid market fundamentals including demography and significant government measures targeted at lowering loan rates.
Increasing business confidence will increase South Africa's demand for logistics.
The IMF has downgraded South Africa's GDP projections from 4.6 per cent in 2021 to 1.9 per cent in 2022 because of the increase in Covid-19 caseloads and their impact on the business environment. However, despite the government's significant monetary and fiscal regulatory actions, business confidence is still strong. This optimistic prognosis was further supported by the South African Chamber of Commerce and Industry Business Confidence Index SACCI BCI, which for the first eleven months of 2021 averaged 94.0, 8.2 index points higher than the 85.8 average for the same time in 2020.
The real estate market is predicted to continue to be robust in 2022 as a result of this optimism. Particularly the logistics industry will be one to keep an eye on, driven by the expanding e-commerce market and sustained demand for top-notch logistics facilities. According to Rode's Industrial Survey, the industry ended the year as the best-performing real estate market after recording a nominal rent rise of 3.7% year over year in Q4 2021 despite low vacancy levels.
Egypt's real estate boom is anticipated to continue
In general, the pandemic has been good for the Egyptian real estate market. According to the Ministry of Planning, the industry expanded by 8% in 2021. Developers have noted that the local real estate market has remained stable for the first time in 15 years. A total of US$10 billion in sales were generated in the market in 2021, and further foreign investments of US$500 million contributed to the rising investor confidence in the sector.
The general real estate market across all sectors is one to watch out for in 2022 due to its stability across the property cycle, especially for core capital allocation. Particularly the residential sector is expected to grow very well thanks to rising foreign investments and falling interest rates that will encourage more investment. According to the Egyptian Businessmen Association, the sector is therefore expected to have stable demand as well as an increase in the number of completed units available.
Despite political and economic unrest, growth in the Nairobi real estate market is anticipated.
The third quarter of 2021 saw 5.2 per cent growth in the real estate market in Kenya. Compared to the 3.7 per cent growth seen in the same quarter in 2020, this constituted an increase Kenya National Bureau of Statistics. According to the Ministry of Lands and Physical Planning, the number of land transactions over the same period more than doubled from the 1,734 transactions registered in 2020, highlighting the return to market activity in the real estate industry. While this increased activity is anticipated to last through 2022, overall GDP growth is expected to decelerate to 5.9 per cent in 2022 from 8 per cent in 2021 as a result of currency changes and political unpredictability surrounding the impending general election.
With Nairobi's status as a regional hub strengthened by the opening of the Global Trade Center tower and the creation of the Nairobi International Financial Center, the prime office market will continue to be a crucial area to watch in the market. With large office parks like the Garden City Business Park posting occupancy levels above 90%, vacancy levels are expected to stay low due to the pent-up demand for premier offices.
New hotspots will drive Nigeria's real estate market's expansion.
In a period of increased market activity from December 2021 to December 2022, the Nigerian real estate market remained comparatively robust. However, important industries like the office and hotel sectors continued to be muted, with Grade B offices having vacancy rates as high as 36% and those in the former as low as 55%.
Nevertheless, we believe that the market will keep expanding, with industries like residential, logistics, and healthcare providing the necessary fuel. The residential sector, in particular, is expected to prosper best in 2022 due to rising demand and a shortage of supply. Furthermore, as infrastructure continues to expand, major developing hotspots are projected to emerge in places like Epe and Yaba that will outperform the total residential market. These neighbourhoods had an increase in demand over the previous year, and their overall rental yields, at 4.3 per cent and 5 per cent, respectively, have tracked the average market rate of 5 per cent.
Demand from investors will support Ghana's real estate sector.
The Ghana Investment Promotion Center reports that in 2020, the nation received $2.65 billion in foreign direct investment FDI, the highest sum in West Africa. The country recorded over $800 million in FDI during the first half of 2021, continuing this boom. With yearly yields averaging 10% across the retail, office, and industrial buildings, the real estate sector, in particular, continues to be among the most alluring industries.
Due to Ghana's "Year of the Return" program, which aims to attract investments from Africans residing abroad, this trend is expected to continue in 2022. Demand is anticipated to keep increasing across all sectors, therefore it is unlikely that headwinds like an increasing debt load and the associated downgrading of Fitch ratings to a negative outlook will dampen consumer confidence. Particularly the residential sector will be one to keep an eye on, supported by solid market fundamentals including demography and significant government measures targeted at lowering loan rates.
Increasing business confidence will increase South Africa's demand for logistics.
The IMF has downgraded South Africa's GDP projections from 4.6 per cent in 2021 to 1.9 per cent in 2022 because of the increase in Covid-19 caseloads and their impact on the business environment. However, despite the government's significant monetary and fiscal regulatory actions, business confidence is still strong. This optimistic prognosis was further supported by the South African Chamber of Commerce and Industry Business Confidence Index SACCI BCI, which for the first eleven months of 2021 averaged 94.0, 8.2 index points higher than the 85.8 average for the same time in 2020.
The real estate market is predicted to continue to be robust in 2022 as a result of this optimism. Particularly the logistics industry will be one to keep an eye on, driven by the expanding e-commerce market and sustained demand for top-notch logistics facilities. According to Rode's Industrial Survey, the industry ended the year as the best-performing real estate market after recording a nominal rent rise of 3.7% year over year in Q4 2021 despite low vacancy levels.
About the Author: Eze Saviour
