Professional Documents
Culture Documents
What does
the residential
investment
opportunity
look like in
Africa?
Slums
Real Estate
Kenya’s real estate
3
market is booming
§ Average value for a property
has risen from Ksh 7.1m in
Dec 2000 to Ksh 31.4m in
March 2017
§ 4-6 bedroom: Ksh 47.3m
(US$458 000)
§ 1-3 bedroom: Ksh 14.1m
(US$136 000)
Source: CGIDD income and population data for Kenya (urban population only), in 2005 dollars, calculated with current
mortgage rates in Kenya: 17% over 10 years, no deposit
Given Kenya’s population dynamics, market players would realise a much greater
market opportunity by offering and financing products that cost less than $15 000,
than by sticking to the $25 000 + real estate market.
US$100 000:
affordable to
a household
earning
about
$83 000 p.a.
(about 0.3% of
the urban
population or
7850
households)
Price of the cheapest, newly built house by a formal developer in 2015 (US$) Price of the cheapest, newly built house by a formal developer in 2016 (US$) What is the size of this house (in m2) in 2016?
$180 000
Price of the cheapest, newly built house by a formal developer
250
$160 000
$140 000
200
$80 000
100
$60 000
$40 000
50
$20 000
$- 0
Mozambique
South Africa
Libya
South Sudan
Sierra Leone
Angola
Rwanda
Gabon
Djibouti
Burundi
Chad
Ghana
Zimbabwe
Morocco
Burkina Faso
Tunisia
Botswana
Uganda
Benin
Ethiopia
Nigeria
Lesotho
Cote d'Ivoire
DRC
Kenya
Guinea Bissau
Gambia
Mauritania
Niger
Tanzania
Comoros
Namibia
Eritrea
Mali
Madagascar
Zambia
Somalia
Mauritius
Senegal
Egypt
Togo
Cameroon
Seychelles
Malawi
Algeria
Swaziland
Source: 2016 Housing Finance Yearbook http://bit.ly/HousingFinanceAfricaYearbook2016
Email correspondence with local practitioners, annually
… and happens rarely at scale. But even a $20 000 house is unaffordable for
the majority – and these are only available in limited projects. Most housing
is built by the owner, incrementally, step-by-step.
Is a
$10,000
house
affordable?
In some
places.
It all
The gap between what
“affordable” housing would depends
cost to finance, and what the on the
average household can afford finance.
to pay, is simply too large. In
most countries, even $10 000
is too much for the average
household.
Mortgage markets are tiny – in some cases inconsequential 9
30,4
25 24 25
Mortgage to GDP (percent)
22,15
20 18,21 20
15 12,99 15
9,25
10 10
7,5 6,3 6,1
5 3,31 5
2,83 2,63 2,5
1,29 1,2 1 0,91 0,9 0,58 0,53 0,5 0,5 0,49 0,4 0,34 0,1 0,07
0 0
Average Mortgages % of GDP Predominant mortgage interest rate - prime (2016) Predominant mortgage term - max years (2016)
In part as a result, African mortgage markets are tiny (and data is limited).
Lower interest rates seem to correlate with larger mortgage markets.
Source: CGIDD income and population data for Kenya (urban population only), in 2005 dollars, calculated with current
mortgage rates in Kenya: 17% over 10 years, no deposit
How much
can a
household
earning
$750/
month
afford?
It all
Financial services can depends
have a profound effect on the
on affordability, and on finance
housing supply, even for
moderate income
earning households
12
1 Targeted innovation
Mortgage liquidity facilities Real Estate Investment Trusts
§ EMRC 2007 / TMRC 2010 / CRRH § Internationally accepted investment
2012 / NMRC 2014 structure
§ Draws investors and lenders into the § Aggregators: enabling big money to meet
mortgage market small projects
§ Encourages government to engage in § In Kenya, Tanzania, South Africa,
market development Zimbabwe: different versions of
§ Creates investment precedent and a Development REITs and Investment REITs
documented track record
§ Signal to the housing sector that Maturing models to go down market
finance is available § Rent-to-buy
§ Focuses efforts on opportunities for § Housing microfinance
growth § Employer-supported housing
§ A $10 000 mortgage at <10%? § Social rental & small scale landlordism
2 Better technology
South Africa
14
3 Sharpening practice
NGOs and social movements adopting commercial practice to various degrees of success
§ REALL, with NGOs in in Mozambique, Malawi, Kenya, South Africa, Tanzania
§ Habitat for Humanity
§ NACHU, Kenya
Lenders broadening their business model to accommodate opportunities and engage with
constraints
§ Select Africa in Malawi, Kenya, Swaziland
§ KixiCredito in Angola
§ Trust for Urban Housing Finance in South Africa
§ Zambian Home Loans
§ Shelter Afrique
Cities are better understanding their housing role & local opportunity
§ House Price Index in South Africa
Source: http://www.housingfinanceafrica.org/document/case-study-7-the-transformation-of-the-
housing-finance-company-of-kenya/
4 Government interest
16
& reporting
§ Kenya Central Bank Report
§ Tanzania Central Bank Report
§ Nigeria Housing Finance Hub (NMRC)
18
Watch the countries where rates are coming down… and where they’re going up
300
250
15,00
200
150
10,00
100
5,00
50
0 0,00
Days2016 Days 2012 Cost (% of property value) 2016 Cost (% of property value) 2012
Source: World Bank Doing Business Indicators, 2012 & 2016 (www.doingbusiness.org/data/exploretopics/registering-property )
When registration costs more than 10% of the property, or takes more than
2 months, can a low-income homeowner feel its worth it? Even in South
Africa, informal transactions are common. The time it takes to register
property is a serious disincentive to investment.
300
250
15,00
200
150
10,00
100
5,00
50
0 0,00
Source: World Bank Doing Business Indicators, 2012 & 2015Days 2012
Days2016
(www.doingbusiness.org/data/exploretopics/registering-property)
Cost (% of property value) 2016 Cost (% of property value) 2012
Source: World Bank Doing Business Indicators, 2012 & 2016 (www.doingbusiness.org/data/exploretopics/registering-property )
nuance of affordability
Target markets Target products
of demand
Better understanding understanding
§ Households in informal settlements: § Micro-mortgages: shorter
what can they afford? term, smaller quantum
§ Informal earners / self-owned § Small business mortgages:
businesses focus on the income stream
§ New migrants & youth: rental & § Installment sale / rent-to-own
student housing § Housing microfinance linked
§ Housing-linked businesses with a to mortgages
of supply
Better
track record § Apex institutions /
§ Incremental housing processes, mechanisms to aggregate
linked with housing microfinance demand: i.e. REITs
§ Underperforming neighbourhoods § Developer equity
§ Reforming jurisdictions: shorter § Venture capital that targets
intelligent
Location
22
Thank you!
Kecia Rust
kecia@housingfinanceafrica.org
www.housingfinanceafrica.org
+2783 785 4964