North African property gaining momentum

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Morocco is popular as a property investment destination in the North African region because it is in close proximity to Europe. Morocco is popular as a property investment destination in the North African region because it is in close proximity to Europe.

Egypt and Morocco stand out as the largest commercial property markets in North Africa. Tunisia stands out as a tourist driven property market, Africa Property has learned.

Egypt is the third biggest economy in Africa. A large portion of its real estate is state-owned but there are opportunities in the country for new developments.

The Egyptian real estate market was hard hit by civil unrest a few years ago but the country’s new government has brought stability to its real estate market.  

The new government's recent economic and political stabilisation, despite its appalling cost in terms of human rights, has improved sentiment in all sectors, especially in major city Cairo during the last nine months of 2015, according to research house Jones Lang Lasalle. 

Following President Abdel Fattah el-Sisi’s election in June 2014 there is new found confidence, despite the ongoing Islamic insurgency in Sinai and several terrorist attacks.

In terms of investment from abroad however, much has been in Egyptian retail and manufacturing companies as opposed to in real estate companies. This is because these have been strong performers compared with other emerging market companies. Some emerging markets are expected to perform well in 2016. 

However, North Africa is being seen as a long term investment play. Most global property investors are looking at investing in Europe and the US in terms of property. Europe offers listed companies the ability to develop assets with relatively little debt. The US’s economy is expected to boom in 2016, given strong job creation and electioneering.

Morocco is popular as an investment destination because it is in close proximity to Europe. This means companies like to use it as a launch-pad into Africa. Many Spanish and French companies are opening their African offices in Morocco. 

South African listed property company Delta Africa, soon to be named Mara Delta, after it merges with Mara Diversified Holdings, owns a shopping mall in Casablanca, Morocco. Part of its strategy is to own shopping centres in Morocco, benefiting from consumer spending there.

Soon after listing, Delta bought Anfa Place, a 30,711 square metre shopping centre in the prestigious suburb of Anfa in Casablanca. This shopping centre is anchored by large European retailers including Carrefour, H&M, Marks & Spencer and Virgin Megastore, and has a weighted average lease expiry of 7.54 years. This is quite long term in listed property terms.

More listed funds are expected to invest in Morocco in the near future.

Tunisia, the smallest nation in North Africa’s commercial property sector is dominated by holiday houses.

Tunisia is home to the ancient city of Carthage and also has white beaches, historical landmarks, warm weather and scenic views of the Atlas Mountains and the Sahara Desert. 

It has served as backdrop for notable films such as Star Wars and Raiders of the Lost Ark. 

Every year Tunisia hosts millions of tourists from Europe and the Middle East. The capital city, Tunis, is about three hours away from key European cities such as Paris and London via air. The coast is just 50 miles away from Sicily of Italy.

Tunisia’s tourism industry is bustling. This has boosted Tunisia's property market and has attracted a great number of foreign buyers looking for affordable properties in prime locations to spend their holidays.

This has been a quick transition. It was only in 2006 that the real estate market was opened to foreign ownership. 

Major companies have been investing – from an estimated 6,270 private developer housing units in 2006, developments increased to almost 12,000 units in 2010, according to UN statistics. 

From 827 registered construction developers in 2001, the number has grown to 1,290 in 2007 and to almost 3,000 in 2013.

Despite post-Arab Spring uncertainty about the safety of property in the country, interest in Tunisian real estate remains high, boosted by the successful elections of October-December 2014. 

According to the Centre for Affordable Housing Finance in Africa, property prices have been rising at a rate of 8% per year since 1990, and have continued to rise following the Arab Spring revolution, which started in Tunisia.

Prices may continue to rise as Tunisia continues to struggle with inflation and pressure on its foreign reserves. As an aftermath of the economic slowdown that came after the revolution, inflation increased in 2012 and has been fairly unstable since.

Some property players like Stanlib and Old Mutual, have exposed themselves to North African property assets. Seeing that African retail investors may not have many listed funds in North Africa to buy shares in, they can take up investment policies with these banks in order to gain exposure to the North African market. 

Gulf based funds are also making inroads in North Africa. One large fund that is doing so is Dubai-based Abraaj Group. This fund earlier this year amassed its largest pool of private equity capital yet for investments across Africa. The group, which focuses on private equity in emerging markets beyond the Brics’ countries such as Brazil, Russia, India, China and South Africa, said it had raised $375m for a North African fund.

Combined with other capital raised in early 2015, targeted at the sub-Saharan region, the two funds gave Abraaj just under $1.4bn to spend in the continent’s markets. This makes Abraaj a major player in North and Southern Africa. 

African investors need to wait patiently for more North Africa focused property funds to list on African stock exchanges. Meanwhile they may wish to invest in banks which have launched funds for North Africa.

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