How COVID-19 has impacted Africa’s real estate sector

The COVID-19 pandemic has wreaked havoc on global economies, and Africa's real estate sector has not been spared. During the height of the pandemic, the property market experienced significant declines in occupancy rates and revenues. However, as the continent seems to have passed the peak of the pandemic, most sectors are now bouncing back. In a recent interview on CNBC Africa, Koome Kirimi, CEO of Ardhi Lords Management, shed light on the current state of the real estate sector in Africa. Kirimi discussed the impact of the pandemic on various sub-sectors within real estate, such as retail, commercial space, and residential properties. He attributed the depressed market trends not only to COVID-19 but also to pre-existing factors such as oversupply in certain regions like Kenya. The oversupply, coupled with reduced incomes and reluctance from banks to lend, has led to a decline in demand for real estate across Sub-Saharan Africa. According to Kirimi, all sub-sectors, including residential, have been affected by the pandemic. Rental and buying markets have seen a significant downturn as people's incomes have been affected, making it challenging for individuals to purchase properties. Developers have had to resort to price reductions, but these measures have not been sufficient to offset the market trends. In the office space segment, absorption rates dropped by 60% in the first quarter of 2020, with rents shrinking in Nairobi due to dollar fluctuations. Kirimi highlighted the importance of government measures in cushioning the economy and the real estate sector. While governments have implemented tax reductions like the value-added tax in Kenya, more policies are needed to leave disposable income in the hands of consumers to reignite the market. Kirimi emphasized the need to focus on affordable housing to address housing deficits in various African countries. He pointed out that shrewd investors should target the affordable housing market, catering to individuals with lower incomes, to fill in these deficits and emerge as winners in the upcoming years. Despite the challenges posed by the pandemic, Kirimi remains optimistic about the future of the real estate market in Africa. He believes that the market is currently conducive for investors, with numerous opportunities available for those willing to take the risk and wait for the rebound in mid-2021. While capital has been diverted to other sectors like healthcare in 2020, the real estate sector still offers promising investment prospects. Kirimi predicts a stabilization in rents and valuations in the second quarter of 2021 as consumer incomes start to rebound. Looking ahead, Kirimi stressed the need for the real estate sector to diversify and reduce its dependence on external markets to weather future uncertainties effectively. By building resilience and sustainability within the sector, Africa's real estate market can better absorb shocks and navigate future challenges without relying heavily on external aid.