The Untold Truth About Investing in Real Estate in Africa

Africa is an attractive continent for property investors, with some of the fastest economic growth rates in the world. However, the region’s economic prospects vary considerably from country to country. As a result, you’ll need to tailor your investment strategy to the local market.

The boom of the past few years has created a crowded real estate market in some parts of Africa. To stand out from the crowd and achieve the best possible returns, you need to understand the untapped potential of the sector in your country.

Fortunately, there are numerous investment opportunities in Africa’s real estate market. If you are willing to look beyond the myths and misconceptions, you will discover a wealth of untapped market potential.

In this article, we will debunk 10 popular myths about investing in real estate in Africa. We will discuss why you should consider doing so, as well as potential pitfalls and risks associated with the sector.

Myth 1: Real Estate in Africa is Overvalued

In some parts of Africa, real estate markets have seen price increases of over 100% in just one year (Nigeria’s real estate market is a good example). Such price increases have led to concerns that the sector is increasingly overvalued and headed for a crash.

So, is it too late to invest in real estate in Africa? On one hand, price increases have been pretty extreme. On the other hand, the continent’s property markets have a long history of dramatic price surges and dips. Therefore, it’s difficult to say for sure if this is a once-off phenomenon or if the sector is simply more overvalued than usual.

A better question is this: is it too early to invest in real estate in Africa? Unfortunately, the answer is no.

While there are a few countries in the region with some level of price moderation, most of them are experiencing sustained double-digit growth. This means the potential for outsized returns remains very strong.

If you are willing to get on the ground and discover opportunities where they exist, you will be in a much better position to make a successful investment than if you wait for the sector to come crashing down like a pack of unruly stocks.

Myth 2: Africa is a Bad Investment Destination

Some people wonder if Africa is really a good investment destination. After all, many countries in the region are still characterized by widespread poverty and political instability. Are there any long-term economic benefits for investors?

The short answer is yes.

In recent years, Africa has been experiencing one of the biggest economic growth spurts in history. In many countries, real GDP is growing by over 4% per year.

This growth is expected to continue. In fact, many analysts believe Africa will be the fastest growing region in the world over the next decade. Consequently, the potential for significant investment returns is great.

However, Africa is not a one-size-fits-all destination. Within the region, there are significant differences in terms of the level of economic development, the quality of institutions, and the availability of investment opportunities.

You should carefully consider the investment potential of a specific country before making any investment decision.

Myth 3: Real Estate in Africa is a Bad Deal

Real estate in Africa is often described as a bad deal. However, this is not entirely accurate. In most parts of the continent, real estate is not a great investment. However, in a few select countries, this is not the case.

Take Nigeria, for example. Despite the high level of inflation in the country, the real estate sector has seen some signs of improvement. There has been an increase in investor interest, and average property values are increasing. In some parts of the country, real estate may actually be a good investment.

How about real estate in South Africa? The country’s real estate sector has been hit particularly hard by the country’s high level of public debt. Still, there are pockets of the market where public debt is not a concern, and real estate may be an attractive investment.

Myth 4: You Need to Have a Big Bankroll

Many people believe you need to have a big bankroll to invest in real estate in Africa. This, too, is not entirely accurate. In some parts of the continent, real estate is a bad investment. However, in other regions, you only need to have modest capital to make a profit.

Again, the level of investment return varies significantly from country to country. For example, Tanzania’s real estate market is not for the faint of heart. At current market prices, it would take an investor more than 20 years to break even.

In comparison, South Africa’s real estate sector is more attractive, with an investment of up to $2 million currently resulting in a profit after just two years.

Myth 5: There isn’t Enough Land and Construction Talent in Africa

Another common misconception about investing in real estate in Africa is that there isn’t enough land and construction talent in the country. This is partly true in some parts of the region. For example, as a result of Nigeria’s corruption problems, there is little hope of ever building enough quality infrastructure to meet growing demand.

However, in many other parts of the continent, there is ample land and construction talent available. If you look closely, you will see that land is the main problem in many African countries. As the population grows, so does the demand for land. This, coupled with an expanding middle class, will lead to an increase in demand for property.

Construction talent is also a scarce resource in many African countries. However, as the property sector emerges from crisis, there will be more opportunities to find construction workers.

Myth 6: Corruption is the Scary part of Investing in Africa

Some people are afraid to invest in real estate in Africa due to the high level of corruption in the region. This is partly true for certain types of investments – for example, oil exploration and mining. However, in many parts of the continent, real estate offers a good opportunity to make money through lawful means.

You can make money legally by buying a property with a good chance of increasing in value and then renting it out. You can also buy properties with a good chance of becoming rented-out properties in the future. There is nothing wrong with making money by buying and renting out property.

There is, however, a big difference between making money through legitimate investments and making money through corrupt means. If you are considering investing in real estate in Africa, you need to be aware of the high level of corruption in many parts of the region. You should also have a plan for dealing with associated risks.

Myth 7: Africa is an Emerging Market, So It’s Overvalued Already

Some people wonder if Africa is an overvalued market because it is an emerging market. While it’s true that many parts of the continent are experiencing huge economic growth, this is misleading.

While growth in emerging markets is usually faster than that of developed markets, it is important to consider the quality of the growth. In many cases, it’s too soon to tell how well a country’s economy will perform in the long run. It’s also worth noting that in some cases, growth in emerging markets has been negative.

At the end of the day, it’s important to understand that emerging markets are risky investments. The key is to find a good investment opportunity, and then to take the necessary steps to minimize risks.

If you are willing to get on the ground and discover opportunities where they exist, you will be in a much better position to make a successful investment than if you wait for the sector to come crashing down like a pack of unruly stocks.

Conclusion

The real estate sector in Africa is booming. In some parts of the continent, real estate is an attractive investment. However, the potential for significant investment returns varies considerably from country to country. You should carefully consider the investment potential of a specific country before making any investment decision.