Africa Real Estate - Know The Facts If you have been thinking about investing in real estate in Africa, now would be a good time to invest because the continent is poised for growth. Property experts and savvy investors are of the consensus that Africa is the place to be putting one’s money. Not only will this strengthen the real estate property market on the continent, but it will stimulate economic growth and grow the industry in some countries where real estate has not been tapped into. At the inaugural Africa Property Investment Summit hosted by Liberty Properties, Samuel Ogbu, chief executive officer of Liberty Properties described Africa as a key investment destination and investors only need to find out how to unlock the vast opportunities in the African property market for superior returns. While some investors and would-be property buyers are yet to find Africa’s sparkling property jewels, bold South African retailers are wasting no time in setting the trend by trading outside of South Africa’s borders. Johannesburg Stock Exchange (JSE) listed retail group, Woolworths Holdings Limited announced that it aims to open 16 stores in other African countries this year. The bullish retailer with a reputable brand will have in total 60 stores outside of Africa increasing its retail space by 42 percent in the current financial year and by an estimated 145 percent over the next three years. Woolworths is not alone in its pursuit to aggressively penetrate the African real estate market. Another JSE listed retailer of food, general merchandise and clothing Pick n Pay opened its first store in Bagatelle Mall in Mauritius last month. The group has a total of 775 stores made up of Hypermarkets, Supermarkets and Family stores. Pam Golding Properties, locally and internationally recognised as Southern Africa’s leading independent real estate agency, aims to open shop in other African countries. The group chief executive officer Dr Andrew Golding says they are looking at markets including Nairobi, Kenya, Angola and West Africa. On Africa real estate, Golding says when choosing countries in which to set up shop, they look at the political stability of that country, property rights, the size of the real estate market and existing competitors. He adds that having the property fundamentals right and finding the right partners is key in these markets. Africa is indeed a booming continent and the African population is a new market with unexplored opportunities and new demand to consume everything from financial services to beverages, appliances, cars and houses. The economic rationale for investing in Africa is shifting from an emphasis on taking out to an emphasis on selling, according to the Housing Finance in Africa 2011 Yearbook. This is what the authors of the publication say: “Construction cranes in Lusaka, Accra and Nairobi, traffic jams on Dar Es Salaam and virtually every other city - the streets are packed with vendors and roadside shops selling furniture, building materials, etc. Liberty Properties is building the first fully enclosed shopping mall, the Levy Shopping Centre in Lusaka, Zambia valued at US$200 million. He says for this project, Liberty Properties partnered with the country’s largest fund manager, the National Pension Scheme Authority. There’s a sense of activity and bustle and this activity highlights the opportunities and challenges in investing in this dynamic continent. Furthermore, the publication reveals that the middle class in Africa is growing and this is what investors are beginning to appreciate about Africa. Developers face challenges such as the complexity of the development process, access to finance and infrastructure. However, with these and other difficulties, Africa’s mortgage market is tiny and there is certainly room for growth. It is with this in mind, that Property24 spoke exclusively to Liberty Properties to find out how would-be property buyers and investors cash in on this newly found honeypot in Africa. Liberty Properties considers property as the primary investment asset class globally and with growing world economies in Africa and other parts of the world, the group foresees an increase in demand for quality properties, says Mel Urdang, director of retail at Liberty Properties. He explains that prime locations coupled with a relevant, suitable tenant mix and well maintained property and asset managed portfolio provide for returns in the long term. Asked what property acquisition criterion is used particularly in light of new opportunities within the continent, he says Liberty is currently looking to set up funds within the broader Liberty Group. “We look for attractive forward yield, favourable land tenure, quality long-term potential for earnings and location.” Urdang has tips for buyers and investors looking to invest in Africa: - Do your homework around the specific geographies – only fools rush in - Understand the leasehold/freehold issues around property ownership - Use local knowledge and partner with people on the ground - Try investing in listed vehicles which provide exposure to property with liquidity, suitable yields and daily pricings - Understand the tax implications and exchange rate risks On his expectations for future returns in Africa, he says if one invests in quality assets, they will reap rewards. Located in Mbabane, the 15 000 square metre top grade Mbabane Office Park with ground floor convenient retail will be developed at a cost of US$40 million “The lack of supply and increasing demand will drive values of quality real estate assets on the continent.” Urdang emphasises the fact that partnerships have proved to be very important, certainly for Liberty Properties when entering new markets outside of South Africa. Liberty Properties is building the first fully enclosed shopping mall, the Levy Shopping Centre in Lusaka, Zambia valued at US$200 million. He says for this project, Liberty Properties partnered with the country’s largest fund manager, the National Pension Scheme Authority. “Partnerships are not only essential for gaining an understanding of each country’s business climate, they also allow for an exchange of skills and knowledge between both parties.” We also believe that it is essential to adopt a partnership model with our South African service providers, tenants and co-developers. The synergies that arise from effective partnerships mitigate risk and make it easier to unlock the full potential from the opportunities available, he says. Liberty Properties together with Swaziland’s Public Service Pension Fund is developing the first of its kind in the country’s commercial property market. Located in Mbabane, the 15 000 square metre top grade Mbabane Office Park with ground floor convenient retail will be developed at a cost of US$40 million In his latest publication entitled ‘Africa Opportunity’, Brett Abrahamse, former business development manager at Liberty Properties and Africa real estate enthusiasts describes Africa as a single continent but a world of opportunity in the context of real estate. He says Africa has long been associated with perceptions that perhaps may have prevented investors from buying property in the continent. These include the fact that Africa has low growth prospects, high inflation, weak economies, high incidents of corruption, high political risk, lack of property rights, unsophisticated capital markets and lack of demand from tenants. The realities of these perceptions are somewhat different as Abrahamse notes: - Almost all GDP growth forecast exceeds those of the developing world and is in line or exceeds BRICs economies - Inflation in Africa has been well managed since the early 2000s although risks still exist - Many diversified and resilient economies are being driven more and more by internal demand - Corruption levels are in line with those of BRIC economies - The political risk profile in Africa is similar to the broader developing world - The lack of property rights is on par with that experienced in developed and in BRICs economies, and this is swiftly improving across the continent - There are 29 stock exchanges and a growing number of listings across the continent as well as increased awareness of REIT legislation and property listings For would-be property investors wanting to get on the bandwagon that is investing in Africa, Brett Abrahamse lists countries including Ghana, Nigeria, Angola, Zambia, Botswana, South Africa, Namibia, Kenya and South Sudan as the most-sought after real estate markets in Africa. If you buy the Africa story, then you have to buy the real estate story, he adds. - As for lack of demand from tenants, he says there is a surge of South African and international tenants looking for property space outside of the continent. Abrahamse says there is an increase in the ease of doing business in Africa with countries including Rwanda, Ghana, Nigeria, Mauritius and Botswana having shown the most improvement on this score. For would-be property investors wanting to get on the bandwagon that is investing in Africa, Abrahamse lists countries including Ghana, Nigeria, Angola, Zambia, Botswana, South Africa, Namibia, Kenya and South Sudan as the most sought-after real estate markets in Africa. Whether you want to invest in residential property or commercial property, Africa has it all. He explains that the retail property market is driven by consumer spending and growing urbanisation in the continent, industrial (resource benefication and labour), hospitality industry (GDP growth, globalisation and tourism), office sector (GDP growth and economic stability) and the residential property market is driven by population growth and urbanisation. With all of the above, Abrahamse likens Africa to a captivating, intriguing story that is waiting to be told. “If you buy the Africa story, then you have to buy the real estate story,” he adds. – Denise Mhlanga. Property 24
Posted on: Tue, 25 Mar 2014 21:03:07 +0000
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