Africa’s real estate market shave experienced significant volatility over the past year as a result of changes in the regulatory environment, swings in commodity prices and growing political and economic tensions.
However, analysts from Standard Bank maintain that the continents market fundamentals remain in favour of opportunities for long-term investors drawing from the continuing demand-supply imbalances. As a matter of fact, investors have sustained interest in the markets with modest growth noted in some of the key markets.
“This growth points to an evolution in the continent’s real estate sector as well as to the urgent need for investors in this space to adapt their approach in line with this evolution and to seek out more economically sustainable ways to participate effectively in these markets,” said Niyi Adeleye, Head of Real Estate Finance for Africa Regions at Standard Bank.
Under the current circumstances, the recommendation is for investors to adopt strategies with a long-term outlook, incorporating insights for value delivery drawn from market research. Investors recognize that a ‘one-size-fits-all’ approach does not work in Africa and it is crucial that sufficient time and resources are put into understanding the vast and varied markets that call the continent home.
The prevailing sentiment is that the more traditional private equity funding model has begun to unravel, pushing investors to begin appreciating the merits of more long-term approach in structuring their portfolios.
“When the size of an economy does not allow for the scale that investors are looking for, this limits the depth and size of the investments that they are able to make in that economy,” said Mr Adeleye.
“We are however, now seeing a shift towards more diversified markets and the evolution of previously untapped asset classes, as well as the emergence of a new breed of investor class,” he adds.
The recent changes have led to a demand for new asset classes and innovative ways of dealing with traditional asset classes. A case to point out is the emergence of ‘property aggregators’ who acquire properties at reasonable discounts and repackage them to achieve their return objectives.
As a result, markets are evolving both in quality, variety and depth, triggering the start of a new cycle of development and acquisition, with increased sustainability built into the structure.