Rising housing costs threaten real estate investment across Africa — Report

RISING housing costs across Africa are threatening real estate investment, as soaring property prices, limited access to affordable housing and weak financing mechanisms widen the gap between housing supply and the purchasing power of millions of people.

According to the report by Housing Development Advocacy Network, despite strong demand for accommodation across the continent, developers are increasingly confronted with a market in which many available properties remain beyond the reach of prospective buyers.

The report noted that the challenge was not necessarily a lack of demand but a mismatch between the houses being built and the needs of the majority of the population.

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“In many African cities, developers continue to concentrate on luxury apartments and high-end residential estates, while low- and middle-income earners struggle to secure decent accommodation at affordable prices.

“ A developer may construct dozens of luxury apartments costing hundreds of millions of naira, while thousands of working-class families within the same city struggle to afford modest homes

“ This imbalance risks creating an oversupply in certain property categories while leaving the affordable housing segment significantly underserved,” it said.

The result  of this imbalance, the report said would present housing market disconnected from the economic realities of the population, where strong underlying demand does not always translate into property sales or sustainable investment returns.

Advising industry stakeholders, the report said they must therefore look beyond the number of buildings constructed and consider whether properties are affordable, appropriately located and supported by accessible financing arrangements.

It pointed out that the growing disparity between property prices and household incomes posed a significant challenge to real estate development across Africa.

As construction costs, land prices and financing expenses rise,  the report explained that developers are  faced with pressure to increase selling prices to protect their profit margins.

It stressed that higher prices further reduced the number of prospective buyers who can afford to purchase properties, particularly in markets where mortgage financing remains inaccessible to a large proportion of the population.

“This creates a difficult situation for developers. While the need for housing continues to grow, the number of people capable of purchasing newly built properties may remain limited,” it said.

When developers concentrate excessively on the luxury segment, the report pointed out that they risked accumulating unsold properties, extending marketing periods and tying down capital that could otherwise be deployed into new projects.

Addressing the problem, it said would required a shift towards housing models that reflect local income levels, household needs and the financing capacity of prospective homeowners.

“Developers must increasingly consider smaller housing units, cost-effective construction methods, locations with access to employment opportunities and partnerships that can improve access to mortgage financing.

Without such adjustments, rising housing costs could continue to undermine investment returns while excluding millions of households from formal homeownership,” the HDAN report read.