Macroeconomic and political uncertainties make African real estate unattractive for foreign investments, according to a report by Estate Intel.
It noted that the dwindling macroeconomic indicators may affect African real estate in 2024, leading to a decline in market activity across the continent.
The report added that currency performance, inflation, increasing debt levels, and potential default, countries were already seeing a cutback in investment preference.
The report read in part, “The real estate sector in Africa, often touted for its potential and growth opportunities, has been grappling with a myriad of challenges, notably macroeconomic and political uncertainties, along with the repercussions of global tensions.
“These factors have converged to create a landscape where the attractiveness of real estate markets is increasingly influenced by core macroeconomic indicators, leading to a noticeable decline in market activity across the continent.
“There is no doubt that currency performance is most often a great indicator of a country’s economic stability. However, investors currently have a reason to be jittery. With inflation already on the rise, increasing debt levels, and potential default, countries are already seeing a cutback in investment preference.”
According to the report, Nigeria’s naira has recorded the highest rate of depreciation in the year to December 2023 with an 83 per cent decline on the official rate.
“Interestingly, Nigeria also ranked as the third last market due to heightened currency changes (83.66 per cent YTD), high inflation rate (27.33 per cent), and high construction costs estimated at USD1,700 per sqm,” it noted.
On the real estate attractiveness index, the report showed that Botswana and Morocco ranked at the top of the real estate market attractiveness ranking while Ghana and Angola ranked as the least real estate attractive countries.
“Notably, Botswana and Morocco ranked at the top of the real estate market attractiveness ranking. This has been underpinned by relative currency stability, low inflation rates, and lower construction costs.
“For example, Botswana and Morocco recorded inflation rates at 3.1 per cent and 4.3 per cent respectively which is significantly low compared to Egypt’s 35.8 per cent and Ghana’s 35.2 per cent. In addition, Morocco’s construction costs per sqm are estimated at an average of US$ 600 compared to the all-country average of US$ 1,366.
“Generally, this currency performance is set to impact commercial real estate leasing activity, especially for retail and office sectors as well as green field investment financing, especially for social infrastructure such as Affordable housing.”
It stated that continued local currency depreciation would make loans for financing real estate projects in the continent expensive.
The report indicated, “With a limited domestic capital-raising landscape, we are likely to see a limited development pipeline in the majority of the markets.”
