_ Residential investment opportunities in Africa - which sectors are on the rise?

Student accommodation

A continent-wide trend is the demand for accommodation from the mounting number of university students throughout Africa.

There were an additional 2.5 million students in tertiary education in 2017 compared with 2012, according to the UNESCO Institute for Statistics – a 21% increase.

This is a consequence not only of increasingly youthful populations, but also the commitment to raise the university participation rate in countries such as Kenya and South Africa as a way to increase economic growth and reduce inequality.

Over the next five-year period student numbers are likely to continue increasing significantly. An additional 72 million Africans will be aged 15–24 by 2028, with the highest growth – 13 million – in Nigeria.

Across Africa, however, the primary focus of many institutions is on growing their academic facilities and therefore they do not have the space or resource to develop their own accommodation. Increasingly, they are looking to collaborate with developers and landlords in joint ventures to provide suitable options.

Adding impetus to this search is the But capitalising on this opportunity does not come without challenges, from finding the right site to navigating property ownership rights. Key to unlocking the right sites is local knowledge combined with assessments of demographics, existing facilities, developments, both current and planned, and other influencing factors.

Across Africa, however, the primary focus of many institutions is on growing their academic facilities and therefore they do not have the space or resource to develop their own accommodation.

Education hotspots

Zambia

There are already close to 40,000 students attending recognised universities in Lusaka alone, with the Higher Education Authority of Zambia estimating that there were over 61,000 students attending lectures on campus (as opposed to distance learning) in 2016/17.

Provision and participation is supported by the country’s Vision 2030 ambition to increase university and skills training output by 2% per annum.

However, currently only a fraction of students are living in formal student accommodation. There has been limited activity from institutional investors and developers to date, although there have been formal requests from local institutions asking for submissions for student housing on land earmarked for new campuses.

There is increasing private sector tertiary education with new colleges and universities opening, including Cavendish University, the University of Lusaka, Texilla American University, Lusaka APEX Medical University, UNICAF and DMI – St Eugene.

South Africa

Despite being the most established market within the continent, South Africa still has some way to go. While the population of 15 to 24-year-olds is set to rise modestly compared with other African nations, there is still expected to be significant growth 15-24 age group 65+ age group.

The latest UN estimate, as of 2016, puts the number in tertiary education at just over 1 million. The South African government has shown its support for increasing enrolment by announcing in its 2019 budget that R111.2 billion (US$7.9 billion) will be used, over the medium term, to fund 2.8 million “deserving students from poor and working class families to obtain their qualifications at universities and technical and vocational and training colleges.”

In the last few years interest and investment in student accommodation has grown, and the sector is attracting a larger pool of investors. While the typical “hostel” style of accommodation is popular in South Africa, there is a mix of development styles, such as those offering private rooms, or sharing with one or two other people, with shared communal facilities.

Kenya

The number of students in Kenya is growing exponentially and current hostels cannot keep up with demand. The latest Kenyan National Bureau of Statistics estimates from 2017 put the number of students at 520,893.

With expected growth of 15% – almost 1.5 million – in the population of 15 to 24-yearolds, this is likely to increase and operators in the student accommodation market already run near to full capacity.

Senior living

Not only is a growing young population presenting opportunities; investors should also consider the other end of the age spectrum. Over the next ten years the number of people in Africa aged over 65 will grow by 19.5 million, or 43%. Culturally, older generations have been looked after by their families.

However, there has been a more recent move in many areas toward looking at purpose-built retirement accommodation. The developments most in demand include a mix of lifestyle amenities and medical facilities. In South Africa, for example, many retirement villages have been built, some within larger gated communities and others as standalone secure villages.

Middle-income housing

The combination of a growing middle income class and increasingly urban population is driving demand for more affordable housing. Over 547 million people, or 43% of Africa’s population, currently live in urban centres according to the UN.

This figure is expected to almost treble to 1.4 billion people by 2048. However, to date, there have been very few affordable housing projects specifically targeted at middle- and lower middle-income earners constructed on a large scale. This follows the widening gap of affordability of housing across the globe, a concept that we discuss in our Urban Futures report.

“The cost and affordability of finance and design has made residential housing difficult to provide on a large scale in countries like Zambia where the market is dominated by self-build”, says Tim Ware of Knight Frank's Zambia office.

“Even quicker and cheaper construction methods such as prefabricated homes have not worked as most owner occupiers prefer the traditional brick or concrete block homes,” he adds.

Due to limited access to affordable finance and absence of available product, many individuals opt to build homes over several years.

However, with a growing middle-income class employed in both the formal and informal sector, there may be increased demand if homes are made available at the right price point.

Francis Bbosa of Knight Frank Uganda says: “In Uganda there are opportunities in the middle-income housing segment – those earning USh 0.5 million to USh 1.5 million a month – particularly in the greater Kampala areas of Naalya, Namugongo, Buwate, Kira, Seeta, Kitende, and Najjera.”