Growing Demographics in West Africa Reveal Multi million Dollar Real Estate Opportunities

Alan Kay, a famous computer scientist once said, 

“ The only way you can predict the future is to build it”. 

Indeed, these words reflect a strategy that is very important in real estate. Successful real estate investors carve out the best returns when they are able to identify the most promising locations and conditions for property development, or they are able to purchase and leverage properties that rise in value. In view of this, it’s no surprise that the many discerning real estate investors today are increasingly turning their attention to Africa, a continent that is showing unparalleled potential for socio-economic and demographic growth. Undoubtedly, real estate developers and investors have a unique opportunity to profit by finding sustainable and innovative ways to meet the real estate demands of the rapidly growing urban populations across the African continent.

Established trends in urbanization, population growth and technology have and will continue to influence the growth trajectory of African Real estate. Today, Africa has 1.4 billion people but by 2050, Africa’s population is estimated to hit over 2.5 billion according to United Nation figures. In addition to the sheer size, the makeup of Sub-Saharan population growth will also provide unique opportunities in real estate. Investors and real estate developers can greatly benefit from what experts call the ‘demographic dividend’. 

According to the UNFPA The demographic dividend is the economic growth potential that can result from shifts in a population’s age structure, mainly when the share of the working-age population (15 to 64) is larger than the non-working-age share of the population (14 and younger, and 65 and older). Today, half of Africa’s population is aged 17 or less, and the active population aged 15 to 64 will triple between 2005 and 2060. Furthermore, the middle class in Africa (who are seen as major consumers) are expected to grow from 355 million (34 percent of Africa’s population) in 2010 to 1.1 billion (42 per cent of the population) in 2060 according to the African Development Bank. 

Simply put, Sub-saharan Africa’s demographic dividend and the related middle class growth will result in an increase of the labor force, a decline in dependency ratios, increased national savings and an acceleration of urbanization. All of these may lead to higher productivity and more rapid economic growth. Undoubtedly these two key elements: economic growth and population growth will create a conducive environment for a boom in the real estate sector

Naturally, an increase in the young, working population and their purchasing power will lead to a significant increase in the demand for residential and commercial real estate. This demand for real estate will be especially prevalent in the bustling urban centers of emerging African countries as people move to the cities for better access to opportunities. Arguably the epicenter of this multifaceted african real estate boom will be in West Africa, particularly the 600 mile coastal stretch that features the epicenters of four of the biggest economies in the region namely: Ivory Coast, Ghana, Togo, Benin and Nigeria. Research confirms that this West African coastal zone is one of the world’s most rapidly urbanizing regions and some experts have called it a “megalopolis” (that is, a large and densely clustered group of metropolitan centers). The unique idea behind this observation is that the major cities of a megalopolis are connected by vast transportation, economic and social-cultural networks. Other similar megalopolises around the world include the New York-Washington DC- Boston area in the USA, Japan’s Tokyo-Osaka corridor, and other gigantic city clusters in India, China and Europe. However, The Abidjan- Lagos coastal stretch is rapidly surpassing these famous urban zones. In just over a decade from now, the major cities in this west african urban zone will contain 40 million people and by 2100, the Lagos-Abidjan stretch is projected to be the largest zone of continuous, dense habitation on earth, with something in the order of half a billion people.

By extension, there is going to be a concurrent explosion in the demand for property. For instance some experts have identified significant housing deficits in countries like Nigeria (more than 20 million units) and Ghana (around 2 million units) today. One can only imagine how these figures will change in the future. Furthermore, according to UN figures just under 50% of Nigeria’s population now live in urban areas and this proportion is projected to reach 67% by 2050 with a growth rate of around 4%. With Ghana the share of urban population today stands at 57% with an urban growth rate of around 3.2%. In view of this, real estate developers and investors that explore and facilitate urban development in this region now will be better prepared to take advantage of its rapid growth in the future. 

While Africa’s prime real estate markets are significantly more attractive now than they were decades ago, investors still need to exercise a high level of diligence when investing  in order to maximize returns and reduce risk. In truth, Africa is a very diverse continent with different geographic, socio-economic, cultural and political conditions. However, research has identified broad risk factors that must be considered and mitigated to ensure secure, transparent and profitable investment in real estate.

• The impact of political instability and changing government policy;
• Social instability resulting from inequality 
• A lack of economic diversity, with an overdependence on natural resources; 
• Complex legal considerations, such as property ownership rights, investment restrictions land tenure and access
• The volatility of local currencies against the US dollar 
• The timeframe of investments and restrictions on possible exit strategies (e.g. limited institutional investors as compared to more developed markets). 

Fortunately, the status quo is changing for the better, especially in West Africa. New regulations are being put in place to ensure ease of doing real estate business such as Ghana’s 2020 land act. Additionally, private companies are building innovative, technological solutions to provide the trust and transparency needed for sustainable growth in the local real estate industry.

Perhaps the best example of the positive impact of technology on African real estate is the work of Seso Global. Seso Global has built Africa’s most trusted property marketplace which is a unique one stop shop for digital real estate transactions. Through a unique ecosystem of services, they offer buyers access to trusted properties and professional service providers. This allows for a secured end-to-end property purchasing experience along the real estate value chain. Seso Global has partnered with leading real estate professionals to provide transparency to the property market with the aim of unlocking the immense trapped real estate capital in Africa.