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Everything you need to know is included in our Mozambique Property Pack
Are you considering buying real estate in Mozambique? Are you wondering if now is a good time to make a move?
When it comes to market timing, people have varying opinions. The Mozambican real estate agent you know may suggest that it's currently a good time to buy property, but your childhood friend living in Maputo suggests waiting for a couple more months.
At TheAfricanvestor, when we create articles or update our pack of documents related to the real estate market in Mozambique, we base our analyses on factual data and statistics rather than opinions, minimizing biases and uncertainties.
We have thoroughly examined all the official reports and statistics available on government websites. Now, we have a comprehensive database of reliable information and we can help you determining whether it is currently advantageous to purchase real estate in Mozambique.
Dive in and enjoy!
How is the property market in Mozambique these days?
Mozambique is, as of now, a vulnerable and fragile country
Negative
Stability should be the first thing you look at when you want to invest in real estate because it ensures a supportive economic and social framework. It is an information you need as a foreigner who might buy a property in Mozambique.
Sadly, Mozambique is going through a period of great instability. The last Fragile State Index reported for this country is 94.3, which extremely low.
Mozambique is a vulnerable and fragile country due to its history of civil war, poverty, and lack of infrastructure. In addition, natural disasters such as cyclones and floods have caused further destruction and disruption to the country's economy.
It does not seem to be the right time to buy a property in this country. Let's check more data.
Mozambique is forecasted to grow massively
Positive
Second thing to do before investing in Real Estate: evaluate the economic situation of the country.
According to the IMF, Mozambique is likely to finish 2023 with a growth rate of 5%, which confirms the country's quick development. Concerning 2024, the figure we're looking at is 8.2%.
That's not all - this impressive growth will keep going on since Mozambique's economy is expected to increase by 26.6% during the next 5 years, resulting in an average GDP growth rate of 5.3%.
The expected growth in Mozambique means that property values will likely increase, creating an opportunity for investors to make a profit. Additionally, the growth will create new job opportunities, increasing demand for real estate and making it a sound investment.
That being said, there are other indicators to monitor.
Mozambican business owners don't have faith in the economy
Negative
While the GDP growth is important for assessing the property market, it may not fully capture business community sentiments. Fortunately, in Mozambique there is a designated metric that is regularly reported. It's not the case for every country, so we're lucky.
The Business Consumer Index (BCI) is a metric that reflects the confidence of business leaders in both the current and future economic conditions. It's established using surveys and assessments.
According to the Instituto Nacional De Estatistica's data, the latest Business Confidence Index value is -6 for Mozambique.
This low score has been caused by ongoing decreased demand in the accommodation and catering sector for a couple of months. This was worsened by the border closures with South Africa, leading to reduced demand from South African tourists who account for more than 50% of the tourist demand from that region.
This is not new, business operators were not confident 12 months ago either. The BCI score, back then, was at -11.
A lack of confidence among local businesses in Mozambique can create a stagnant property market. Without a positive economic outlook, there may be limited investment and slower property development. Buyers may encounter a lack of available properties and potentially face difficulties in finding quality real estate options.
Mozambique's population is growing but getting poorer
Negative
When it comes to buying real estate, population growth and GDP per capita play a significant role, because:
- a growing population means more people needing homes
- a higher GDP per person means people have more money to spend on housing (which can lead to increased property value over time)
In Mozambique, the average GDP per capita has changed by -3.9% over the last 5 years. It's a bit concerning. However, the Mozambican population is growing (+6% in 5 years).
You'll get good rental yields in Mozambique
Positive
Let's now turn our attention to the rental yield.
It represents the annual rental income generated by a property divided by its purchase price or market value. For instance, if a property in Mozambique is purchased for 10,000,000 MZN and generates 500,000 MZN in annual rental income, the rental yield would be 5%.
According to Numbeo, rental properties in Mozambique offer gross rental yields ranging from 4.6% and 7.3%. You can find a more detailed analysis (by property and areas) in our pack of documents related to the real estate market in Mozambique.
It's a good number.
Everything you need to know is included in our Mozambique Property Pack
In Mozambique, inflation is expected to strengthen significantly
Positive
In two words, inflation is when prices escalate.
It's when your favorite plate of peri-peri chicken costs 400 Mozambican meticals instead of 350 Mozambican meticals a couple of years ago.
If you're considering investing in a property, high inflation can offer you several advantages:
- Property values have a tendency to increase over time, leading to potential capital appreciation.
- Inflation can result in higher rental rates, thereby increasing the cash flow from the property.
- Inflation reduces the real value of debt, making mortgage payments more affordable.
- Real estate can act as a hedge against inflation, effectively preserving the value of the investment.
- Diversifying your portfolio with real estate provides stability during periods of inflation.
- Tax advantages, such as depreciation deductions, can help offset the impact of inflation.
According to the IMF's estimations, over the next 5 years, Mozambique will have an inflation rate of 27.7%, which gives us an average yearly increase of 5.5%.
This data means that Mozambique will most likely face pronounced inflation. In such a scenario, if you make a purchase now, there is a possibility that the value of the property could appreciate over time, enabling you to sell it at a higher price and yield a profit.
Is it a good time to buy real estate in Mozambique then?
Time to conclude !
Considering the current circumstances, 2024 might not be the most opportune time for property investment in Mozambique due to a combination of factors that raise concerns. Despite some favorable signals, caution is warranted. While the forecasted massive growth is promising, it's crucial to note that this growth might not necessarily translate into a stable and prosperous property market. Economic growth doesn't always guarantee a parallel growth in real estate values.
Though good rental yields might be enticing, other critical aspects such as political stability, infrastructure development, and regulatory environment play pivotal roles in determining the feasibility of real estate investment. Favorable rental yields alone might not mitigate risks associated with uncertain market conditions.
The significant strengthening of inflation could have a detrimental impact on property investment. High inflation can erode the purchasing power of potential buyers and reduce the affordability of properties. This might lead to market uncertainties and hinder property value appreciation.
Moreover, the current vulnerability and fragility of Mozambique as a country present substantial concerns for property investors. These conditions encompass economic, political, and social factors that could pose risks to property ownership and investment stability.
Combined with the lack of faith in the economy from Mozambican business owners and the population's deteriorating financial situation, the unfavorable signals paint a complex and challenging landscape for property investment in Mozambique in 2024.
We genuinely hope this article was useful!. If you need to know more, you can check our our pack of documents related to the real estate market in Mozambique.
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This article is for informational purposes only and should not be considered financial advice. Readers are advised to consult with a qualified professional before making any investment decisions. We do not assume any liability for actions taken based on the information provided.
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