Real estate: Building the future in Africa
Real Estate 2020: Building the Future During March 2014, PwC released its Real Estate 2020: Building the future report which highlights global trends and makes predictions about the real estate industry up to 2020. Some of these global trends are already evident in the African real estate industry and others will only start to appear in the future.
The six predictions made for 2020, and beyond, considered in the report are:
The global investible real estate universe will expand substantially, leading to a huge expansion in opportunity, especially in emerging economies;
- Fast-growing cities will present a wider range of risk and return opportunities.
- Technology innovation and sustainability will be key drivers of value.
- Collaborating with governments will become more important.
- Competition for prime assets will intensify further.
- A broad range of risks, including new risks, will emerge. These predictions reflect the impact of global megatrends that will change the global real estate landscape considerably in the next five years, and beyond. Africa will not be an exception. The six global megatrends highlighted in the report are:
Huge expansion in cities, with mixed results.
By 2020, the 21st century’s great migration to the cities will be well underway. Cities will be swelling across the fast-growing countries in Asia, Africa, the Middle East and Latin America. Even developed Western nations will be urbanising, albeit at a slower pace. But not all cities will prosper. While some will become great centres of wealth creation in a multipolar world, others are likely to fail.
Unprecedented shifts in population drive changes in demand for real estate.
Demographic shifts will affect demand for real estate fundamentally. The burgeoning urban middle-class populations in Asia, Africa and South America will need far more housing. Meanwhile, the advanced economies’ ageing populations will demand specialist types of real estate, while their requirements for family homes will moderate.
Emerging markets’ growth ratchets up competition for assets. Real estate is an integral part of the emerging markets’ growth phenomenon. Even as growth moderates in many emerging markets, the pace of construction activity remains rapid, increasing investment opportunities. The rise of emerging economies is also increasing competition among real estate managers and the investment community.
‘Sustainability’ transforms design of buildings and developments. Cities contribute an estimated 70% of the world’s energy-related greenhouse gases while occupying just 2% of its land. Their locations – often in low-elevation coastal zones – and large populations make them particularly vulnerable to the impacts of climate change, such as rising sea levels.
As the world rapidly urbanises, so the pressures to make buildings more eco-efficient are mounting.
- Technology finally comes to real estate and disrupts real estate economics. By 2020, it will have both altered the economics of entire subsectors of the industry and changed the way that real estate developers and the investment community operate.
- Real estate capital takes financial cenre stage. Private capital will play a critical role in funding the growing and changing need for real estate and its supporting infrastructure. Just as asset managers, real estate funds and sovereign wealth funds find the assets under their control swell, so governments will have increasing needs for capital to finance urbanisation. Private real estate capital will become an important partner of governments.
While the impact of most of these global megatrends are already being seen, there’s a natural tendency to underestimate them.
The impact of many of these megatrends on the African landscape will differ from those expected in developed countries The drivers of growth in Africa From our analysis of these megatrends, we have identified eight potential drivers of growth in the real estate industry in Africa According to the World Bank, Africa’s median age was 19.7 years in 2012 and it is expected to increase to 25.4 years by 2050, making Africa the continent with the youngest population. The global megatrend relating to ageing populations and the consequent increase in the demand for retirement homes is therefore not expected to have a significant impact in Africa by 2020.