Africa’s urban landscapes are undergoing a transformative phase, with property pioneers constructing landmark developments that set the stage for future growth. However, to ensure sustainable and orderly development, a well-functioning property ecosystem must emerge to cater to the diverse needs of residential, commercial, and industrial sectors. This article explores the critical components of an effective property ecosystem, the role of African funding sources, and the challenges and opportunities facing Africa’s property markets.
The Need for a Self-Sustaining Property Ecosystem
Without a well-functioning property ecosystem, Africa’s urban centers risk experiencing “urbanisation without growth,” leading to urban sprawl, inadequate housing, commercial space shortages, and insufficient civil infrastructure. A self-sustaining property ecosystem, comprising all the key components of a workable property market, is essential for enabling orderly, planned, and constructive growth in Africa’s property markets.
African Funding Sources for Property Transactions
Research shows that foreign funding for property transactions in Africa is unevenly spread, with only two sub-Saharan African cities (Lagos in Nigeria and Johannesburg in South Africa) among the top-10 recipients of significant inflows of foreign real estate investment between 2003 and 2016. The remaining eight were in North Africa. African-based funders have the resources to provide financing to property market players, but their ability to do so depends on the smooth and efficient development of the African property ecosystem.
Key Components of a Thriving Property Ecosystem
A well-functioning property ecosystem should encompass all the components needed for a nuanced property market that caters to developments of all sizes and market segments. This includes planners, regulators, developers, owners, and service providers, operating within clear parameters and abiding by well-enforced rules and regulations. Funders would observe this and invest accordingly, but there are numerous gaps that need to be addressed before this ecosystem can thrive.
Attributes of Well-Run Property Ecosystems
Efficient property ecosystems are marked by prominent entities featuring formal corporate governance frameworks, clear contracting mechanisms among stakeholders, and suitable urban planning regulations. Yet, in some regions, family-owned enterprises with less-defined governance systems hold sway, while unsuitable urban planning regulations and insufficient urban services hamper foreign real estate investment and economic progress.
Challenges and Opportunities in Africa’s Property Markets
Africa’s property markets face challenges such as the lack of reliable data for risk assessment, underdeveloped regulatory environments hampering efficient planning and approvals, and diverse growth rates across different jurisdictions. Despite these challenges, there are also opportunities, as evidenced by the estimated 13% growth in property finance in target jurisdictions between 2013 and 2015, significantly faster than normal GDP growth.
Conclusion:
Building a thriving property ecosystem in Africa requires focused conversations and collaborative efforts among stakeholders. By addressing the gaps in governance structures, contracting mechanisms, urban planning regulations, and data availability, Africa can create an enabling environment for sustainable urban development. As the property ecosystem matures, it will attract more African funding sources and foster the growth of a self-sustaining property market that caters to the diverse needs of Africa’s rapidly evolving urban landscapes.
