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Real Estate Investment in Africa: Is the honeymoon over?

Company: DLA Piper Prague LLP

DLA Piper and CBRE have launched their annual report on real estate investment in Africa, which this year paints a picture of an attractive, if diverse, landscape for international investors.

The report follows a roundtable discussion hosted by CBRE and DLA Piper, and attended by leading African investment professionals and academics. Those present discussed the opportunities and challenges  presented by factors including international geopolitical events, the oil price crash, and the increasing pace of urbanisation on the continent.

Paul Dineen, Real Estate partner at DLA Piper, said:

"It is clear from this report that Africa continues to be a major destination for investment, but that, as is to be expected in a continent of 54 countries, the picture is mixed.

"Product quality is improving across all sectors, due to the growing influence of international occupiers and developers, and transparency and ease of doing business are improving widely. Meanwhile there are high yields are available – up to 15% in some places.

"However, the collapse in energy and commodity prices has dented growth in many countries including large economies, such as Nigeria and Angola. It has also exposed still-high levels of dependence on natural resources. Meanwhile, the strengthening in the US Dollar has raised the debt-servicing burden for those countries with dollar-denominated debts; and the combination of slower rates of economic growth and abundant development has left many markets looking oversupplied.

"Overall the long-term view is positive, but many will be watching closely to see how the market develops as we move into the second half of 2017."

Phil Gregory, Managing Director, CBRE Middle East & Africa commented:

Africa is a continent of great potential, much of which is still untapped and waiting to be realised. The long-term view regarding ease of doing business in Africa is improving. The jurisdictions that will prosper most rapidly are those that focus on removal of the common barriers including currency and foreign exchange, transparency of title, ease of establishing local partnerships and adaptability and accessibility of local market practices.

“Greater consistency of systems and policies across markets will be key to securing wider investment across the continent, as will greater rigour from governments in supporting and underwriting financial structures. None the less, opportunities still exist and a period of limited short-term growth may well offer investors the opportunity to formulate strategy for the period beyond.”

This report follows the DLA Piper and CBRE Real Estate in Africa report 2016. DLA Piper and CBRE will be hosting a roundtable discussion on investment in Africa during DLA Piper's annual Africa Week later this year.

Tags: Law | Real Estate | Business Development |

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