High returns: Demand is driving growth in key segments like affordable housing

In many ways, Gabon would seem like a natural fit for a high-turnover residential market, particularly in the middle- and upper-income segments, given that the country has one of the highest levels of GDP per capita based on purchasing power parity in sub-Saharan Africa. However, Gabon also grapples with a traditionally low saving rate, issues with credit transparency and limited financial inclusion, which in turn have dampened retail and mortgage lending, and thus slowed formal home purchases.

However, demand elsewhere is driving growth in other key segments, such as commercial property and affordable housing. On the whole, 2013 was an excellent year for the sector. “This year the market is still seeing an upwards trend, allowing 5% to 10% year-on-year growth,” according to Philippe Chandezon, the director-general of local real estate firm BICP, who added that “profitability is around three times higher than in France”.

Government Reforms

The growth comes as a side effect of extensive government reforms that have sought to improve clarity on urban planning, access to land, zoning and procurement issues, as well as construction permits. Chief among these efforts has been the reorganisation of the Ministry of Housing, Urban Planning and Land Registry.

The National Agency for Urban Planning, Topographical Works and Land Registry (Agence Nationale de l’Urbanisme des Travaux Topographiques et du Cadastre, ANUTTC) was created in 2011. The agency is aiming to improve the land title (titre foncier) attribution process. The ANUTTC currently acts as a guichet unique (one-stop shop) with the aim of reducing the time necessary to obtain a land title and associated permits.

Access to land is indeed the main challenge, according to Bakayoko Vazoumana, director of the real estate agency Borivage. “It takes 21 days in Mali and three months in Côte d’Ivoire, but years here in Gabon – this needs to change,” Bakayoko told OBG. The creation of the ANUTTC is a step in the right direction, but there is still room for improvement.

The ANUTTC aims to deliver land titles within 180 days, it has announced. This is especially crucial for the residential market, given that banks will not grant a loan for a mortgage without proof of the land title. The cost of the procedure is 10.5% of the price of the property. The most time-consuming steps of the process are those involving the bureaucracy: searching for the title at the property registry, then registering the sale purchase agreement both at the land department and the property registry.

Relevant Agencies

The National Public Works Agency (Agence Nationale des Grands Travaux, ANGT) tenders and participates in some of the country’s larger mixed-use projects, such as the mixed-use project to revitalise the Port-Mole area of Libreville. For the project, the China Harbour Engineering Company signed a CFA59bn (€88.5m) contract to turn the old port into a marina area with leisure facilities, commercial space and residential units. The project include the rehabilitation and extension of the Boulevard de Mer, and the revitalisation of the coastal area is expected to raise property values in the city centre in the medium term.

The National Housing Council (Conseil National de l’Habitat, CNH) also helps with the implementation of the government’s housing policy, and the Special Bridages for Construction and Urbanism (Brigades Speciales de l’Urbanisme et de la Construction, BSUC) are appointed to tackle illegal land occupation. The job of the BSUC is more complicated than it seems as illegal occupation situations can become rather ambiguous, and removing squatters from occupying plots is a challenge even once property ownership has been settled.

Titles

Due to past uncertainties over land titles, it can be challenging for private developers to access plots. “There is a lack of incentive for promoters, only few new actors have come onto the market and development is being impeded by a lack of viable building land,” said Bakayoko. “The private sector could do more if the state were able to make the plots more viable by providing access roads, water and electricity to allow private companies to follow up with construction.” This would help incentivise the expansion of market supply, according to Bakayoko.

Social Housing

Despite the fact that Gabon is a middle-income country, inadequate housing in slums is not uncommon, particularly in the capital city, Libreville, where more than half of the population is concentrated. A high rate of urbanisation (over 80%) combined with limited regulation results in unplanned urban development and informal settlements without land titles. The cost of a unit of social housing ranges from CFA20m (€30,500) to CFA30m (€46,000), say industry experts, while the minimum monthly wage in Gabon is CFA150,000 (€225). Moreover, access to formal mortgages is limited by poor credit transparency.

There are various reasons why social housing prices are still relatively high. The tropical climate and cost of inputs, including imported building materials, drive up construction costs, while wages for construction workers are also relatively high. Finally, the plots available for purchase and construction are often too big for modest housing projects, according to Chandezon, and therefore too expensive.

As a consequence, the state is working to improve the viability of residential projects – particularly affordable housing projects, a less-than-tempting segment for developers around the world given the more limited profit margins. Still, the government is attempting to make those projects more appealing by reducing overhead costs through infrastructure provision or fiscal incentives.

Following a request from the Ministry of Housing, the French Agency for Development (Agence Française de Développement, AFD) has said it is “ready to finance (through grants and loans) efforts that will improve the technical conditions and overall situation (such as sanitation and roads) of those social housing neighbourhoods, which is the first step before any construction can begin”, according to Yves Picard, the AFD’s director for Gabon.

The Ministry of Housing had announced a target of building 35,000 homes in 2011 over a seven-year period, although the housing deficit in Libreville in previous years has been estimated to be as high as 160,000. The ministry had identified Angondjé, a northern district of the city, as one of the priority locations for housing construction. The initial, ambitious goal of building 5000 housing units per year set in 2010 has been reduced to a more realistic target of 1000 per year. Turkish firm Renaissance Construction has built 900 homes so far.

Planned social housing projects in Cap Esterias totalling 5000 units should be completed by 2018, bringing some relief to a sector affected by strong demand and limited supply. In addition, Sociètè Nationale Immobilière (SNI) has begun construction of 930 units in Nkok, 20 km from Libreville, while the Tunisian group Kontinental Conseil et Ingenierie is working on 5000 housing units on the periphery of the nation’s capital. Finally, Indian developer RPP Infra Projects, with the support of Ecobank Libreville and BDEAC Bank of the Congo, has initiated a mass housing project. According to the ANGT, these projects combined should reduce the cost of social housing to as low as CFA13m (€20,000) for civil servants and even CFA5m (€7500) for low-income residents.

Office Space

In the past, the market for office space – as in most African countries – was rather informal. Companies would rent out private villas as their working premises. But now there is a trend toward a more formalised approach. As of mid-2014 prices stood at around CFA20000 (€30) per sq metre for high-quality office buildings due to their scarcity. Current pricing levels should remain stable in the near future even as more space becomes available.

State Fund

The government’s Gabonese Strategic Investment Fund (Fonds Gabonais d’ Investissement Strategique, FGIS) is financed by revenues from the sale of hydrocarbons. The fund aims to support economic diversification and has invested in port management and infrastructure, as well as in urban development projects (see Economy chapter).

The FGIS is playing a larger role in encouraging capital spending from both the public sector and private sector. The fund is, for instance, one of the main instruments of the Gabonese government’s public-private partnership with the Singaporean company Aman Resorts to build the much-anticipated $70m Nyonie resort project. In addition, the government agency is also partially financing the mixed-use project to revitalise the Port-Mole area of the capital.

Property Prices

Generalising about real estate prices in Libreville is difficult, as sporadic urban development means that they can vary widely, even within the same neighbourhood. For instance, prices in the Montagne Sainte, Gros Bouquet and Kalikak areas range from roughly CFA150,000 (€225) to CFA250,000 (€375) per sq metre, while those in Haut de Gue Gue and Batterie IV are around CFA350,000 (€530) to CFA600000 (€900) per sq metre. The Sablière area is on the rise, with prices at around CFA200,000 (€300) just for land, even with plots as large as 10,000 sq metres. Overall, prices have changed little since 2013.

Regardless, according to real estate insider Bakayoko, “Prices in Gabon are very high.” Like any seafront property anywhere, “The closer you get to the ocean, the more expensive real estate is, and prices for land plots are already equivalent to 30% of the value of the property,” Bakayoko told OBG.

Bakayoko added that the growth in real estate prices appears sustainable over the medium term, given the mismatch between demand and supply. Prices have seen their buoyancy maintained in part by delayed payments from the public sector in early 2014, which had an impact on the development of some projects, limiting new supply and leaving both sales and rental prices elevated. Furthermore, there is little incentive to reduce prices. “Landlords are wealthy enough not to adapt their prices to the market; they can afford to leave their properties without tenants for a few months,” said Bakayoko.

Gabon has seen increased investments from local developers, which is a good sign. However, Gabon – as with many frontier markets in Africa – is seeing a rise in interest from portfolio and direct investors from further abroad, including Europe, North America and Asia, most notably in larger projects in the tourism and hospitality segments.

Financing & Credit

The budget for housing projects is provided by the Ministry of Housing, the ANGT and the SNI, while donors, which include the African Development Bank (AfDB) and the AFD, are also involved in helping finance the development of select projects. The AfDB, for example, has granted a $106.1m loan for the Ndende-Dolisie road project. Meanwhile, the AFD, alongside the EU, has partly funded research into potential options for improving water conveyance in both Libreville and Port-Gentil.

On the retail side of things, housing banks also provide home loans to consumers, but the average interest rate stands at around 18%, which limits the size of the market, although the Banque de l’Habitat du Gabon does offer subsidised loans.

The Central Bank of Gabon’s reference rate is around 9% and private banks’ interest rates vary between 14% and 17% – the inflation rate is around 2% to 3% – for a period of 10 to 20 years.

Outlook

Efforts are made by the government to both streamline bureaucracy and involve the ANGT and the FGIS in urban development, which should have a positive effect on the real estate market in the long run. Removing obstacles such as obtaining a land title would go a long way towards creating an attractive environment for local and foreign investors. In the short term, given limited space for expansion in Libreville and limited housing stock, the price of properties will likely remain high, particularly in areas affected by large urban renovation projects.