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Everything you need to know is included in our Uganda Property Pack
Are you considering buying real estate in Uganda? Are you questioning if it's a good time to invest?
People hold diverse opinions regarding market timing. Your Ugandan acquaintance might suggest that now is a perfect time to invest in property, whereas your spouse, who is originally from Kampala, might have a different view and recommend waiting for more stability.
At TheAfricanvestor, when we create articles or update our pack of documents related to the real estate market in Uganda, we rely on reliable data and statistics instead of personal opinions or rumors when we work.
We have gone through official reports and government website statistics in great detail. As a result, we have created a reliable database filled with valuable information. Here's what we found, which can help you decide whether it's the right time to buy real estate in Uganda.
We hope you'll find practical value in this article.
How is the property market in Uganda currently?
Uganda is, as of now, a vulnerable and fragile country
Negative
Stability is a necessary condition when investing in real estate because it ensures future planning and financial security. It is an information you need as a foreigner looking to buy a property in Uganda.
Sadly, Uganda is going through a period of great instability. The last Fragile State Index reported for this country is 92.1, which extremely low.
Uganda is a vulnerable and fragile country due to its limited resources and infrastructure, and its lack of economic and political stability. This has left it exposed to the negative impacts of climate change, poverty, and disease, making it difficult for the country to develop and progress.
It does not seem to be the right time to buy a property in this country. Let's check more data.
Uganda is forecasted to grow massively
Positive
Second thing to do before investing in Real Estate: evaluate the economic situation of the country.
As projected by the IMF, Uganda is likely to finish 2023 with a growth rate of 5.7%, which confirms the country's quick development. For 2024, the consensus estimate is 5.7%.
That's not all - this impressive growth will keep going on since Uganda's economy is expected to increase by 29.4% during the next 5 years, resulting in an average GDP growth rate of 5.9%.
The expected massive growth in Uganda means that there will be increased demand for real estate, leading to rising prices and a great opportunity for investors to make a profit. Additionally, the economic growth will bring more businesses and people to the area, creating a strong and stable rental market.
Nonetheless, there are other indicators to watch.
Ugandan business owners have a more favorable view of the economy
Positive
How do Ugandans perceive the state of their economy? Relying solely on the GDP forecast might not present a complete picture. Thankfully, in Uganda there exists an official metric that is consistently published. It's not the case for every country, so we're lucky.
The Business Consumer Index (BCI), which relies on surveys and assessments of business leaders, is a metric that gauges their confidence in the present and future economic conditions.
According to the Bank of Uganda's data, the latest Business Confidence Index value is 8 for Uganda. This is a neutral score
That's really encouraging and the trend is upward: the BCI score, 12 months ago, was at 5.
The current business confidence score in Uganda alone isn't enough to decide on property investment. We will look at more data.
Ugandan housing prices began to climb
Positive
Uganda's home prices have increased by 11.5% in 5 years according to Uganda Bureau of Statistics.
It means that if you had bought a safari lodge in Queen Elizabeth National Park for $750,000 five years ago, then it would now be worth around $836,000.
These days, it seems like that house prices are starting to increase. This happens after a long period of stability.
It's definitely an encouraging signal. It might be a good moment to enter the real estate market and invest in a property in Uganda.
You can find a more detailed analysis of the real estate prices in our property pack for Uganda.
Everything you need to know is included in our Uganda Property Pack
Uganda's population is growing and getting (a bit) richer
Positive
When considering a real estate purchase, pay attention to population growth and GDP per capita 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 Uganda, the average GDP per capita has changed by 4.3% over the last 5 years. It's not much, but the growth is here. Furthermore, the Ugandan population is growing (+10% in 5 years).
This means that, if you purchase a safari lodge near Bwindi Impenetrable Forest and rent it out, you will find that each year, you'll attract more tenants with sufficient funds to cover the rent.
If you're considering purchasing and renting it out, this trend is a good thing. Then, there might be a rise in rental demand in Ugandan cities like Kampala, Entebbe, or Jinja in 2024.
Rental yields are average in Uganda
Neutral
Let's now turn our attention to the rental yield.
It's the annual rental income of a property divided by its price. For example, if a property in Uganda is purchased for 100,000,000 UGX and generates 5,000,000 UGX in annual rental income, the rental yield would be 5%.
According to Numbeo, rental properties in Uganda offer gross rental yields ranging from 3.7% and 6.4%. You can find a more detailed analysis (by property and areas) in our pack of documents related to the real estate market in Uganda.
It means that your income potential is relatively moderate.
Everything you need to know is included in our Uganda Property Pack
In Uganda, inflation is expected to strengthen significantly
Positive
In two words, inflation is when expenses surge.
It's when your go-to cup of Ugandan coffee costs 10,000 Ugandan shillings instead of 8,000 Ugandan shillings a couple of years ago.
If you're contemplating investing in a property, high inflation can bring you several benefits:
- Property values tend to increase over time, leading to potential capital appreciation.
- Inflation can result in higher rental rates, thereby boosting 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, preserving the value of the investment.
- Diversifying into real estate provides stability during inflationary periods.
- Tax advantages, such as depreciation deductions, can help offset the impact of inflation.
As indicated by IMF projections, over the next 5 years, Uganda will have an inflation rate of 28.5%, which gives us an average yearly increase of 5.7%.
This data infers that Uganda 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 Uganda then?
Let's wrap things up!
Considering the current landscape, 2024 might not offer the most optimal conditions for property investment in Uganda, given a range of factors. While Uganda's substantial growth forecast is promising, there are notable concerns that should be taken into account before making an investment decision. Despite a more favorable outlook from business owners, the overall vulnerability and fragility of the country could impact the stability of the investment environment.
While housing prices in Uganda have started to rise, it's important to recognize that this may not necessarily translate to a robust property market. The country's economic conditions and political stability are crucial factors influencing the real estate sector's performance. With Uganda being labeled as vulnerable and fragile, investors could face elevated risks that might not align with their investment objectives.
Although Uganda's population is growing and experiencing a modest increase in wealth, these indicators alone may not be sufficient to counterbalance the potential downsides. The country's inflation expected to strengthen significantly could impact the purchasing power of both property buyers and renters, potentially affecting property demand and rental yields.
Neutral signals, such as average rental yields, further underscore the cautious approach that should be taken in 2024. While rental yields are a crucial factor in property investment decisions, other negative signals related to the country's vulnerability and fragility should be carefully weighed before committing to the market. In conclusion, while Uganda presents certain positive aspects, the overall risk profile and potentially challenging investment environment make 2024 less favorable for property investment in the country.
We sincerely hope this article has been helpful!. If you need to know more, you can check our our pack of documents related to the real estate market in Uganda.
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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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