Rapid Urbanisation and the Growing Demand for Housing in Africa

Africa is growing through its cities. And every day, as people flock to urban centres in search of opportunity and change, the demand for housing grows. With an annual urbanisation rate of 3.5% over the past two decades, Africa’s cities are the fastest growing in the developing world. Currently, about 40% of the continent’s one billion people live in cities and towns; and it is estimated that in the next few years, some African cities will be home to as much as 85% of their country’s population. Difficult to contemplate in the abstract, these numbers have a very local feel.

Africa’s cities are crowded and vibrant spaces. The residential opportunity is obvious. The observation is reinforced by the economic context. With higher peaks, and lower troughs, African markets offer a very real opportunity for global investors wanting more than traditional markets can offer. And this growth story is only just starting. Across the continent, new discoveries of oil, natural gas and minerals are promising to completely transform national balance sheets, giving policy makers a fiscal confidence they only dreamed of before. This is giving rise to increasing investment in infrastructure – in transport routes and hubs, energy power stations, and telecommunications networks – which themselves stimulate all sorts of backwards and forwards linkages along the value chain.

Policy makers and practitioners are working hard to expand the reach of Africa’s nascent mortgage markets. The potential opportunity in this market is significant and deserves increasing attention, both for the impact it will have on the housing futures of its residents, and also on economic growth prospects. Still, mortgage markets will only ever serve the minority. Investors will miss the market if they do not consider the realities of affordability across the continent and design their products accordingly. This is a clarion call to the sector: by focusing on the delivery and financing of mortgageable housing, they are missing the bulk of the market. The opportunity lies further down the income pyramid, where the bulk of the population lives. The real challenge facing housing practitioners is building to the market. The demand for affordable housing is significant – all players acknowledge this – but the current average house price of about $31 000 doesn’t even begin to scratch the surface. At that price, not even a fraction of the opportunity will be realised.

Investors, financiers and developers must understand that the market is ripe for innovation that will respond to the needs and capacities of the majority. Governments are also ready for this change, and are clearly open to proposals that will address what seem like intractable problems when tackled alone. As innovation in other markets has demonstrated, it is the disruptive business model that will alter the terrain and create new opportunities for growth. In the housing sector, this is about engaging with the reality of affordability and delivering to the market.

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4 responses to “Rapid Urbanisation and the Growing Demand for Housing in Africa

  1. “Social housing” is a government-subsidised rental accommodation solution for people who earn between R1,500
    and R7,500 a month and as a result fall into the “gap market” of housing. They earn too much to receive free
    housing but too little to meet the qualifying criteria of commercial banks and other housing bond institutions.

  2. The Johannesburg Housing Company (JHC) was conceived at the dawn of South Africa’s democracy. Launched in 1995 into a city in a state of enormous transitional flux, and against the conventional wisdom of the day, JHC has led a pioneering path in the development of social housing in the Johannesburg inner city – and at a national level.

  3. Social rental housing in South Africa certainly seeks to address the affordability challenges of the ‘gap’ market, and JHC and others have done excellent work in meeting some of the demands of the market. Still, the challenge faced by social housing at least in South Africa is two fold – the scale it can achieve, and the level of support it requires from the State. In other countries in Africa, such level of support is not possible – much greater participation by the private sector and households themselves will be required. I agree that rental housing is an under-studied field, however, especially to the extent that it meets the affordable housing demands of this middle market, new urban dwellers.

  4. Africa needs to adapt efficient building systems to enable industrialize housing deliveries. It is interesting even as advance south Africa as is builders and developers are still hesitant to adapt new ways of building technologies….