Analysing Angola’s Housing Divide: Luxury Apartments Amidst a Struggle for Basic Shelter

“It was the best of times, it was the worst of times, it was the age of wisdom, it was the age of foolishness, it was the season of light, it was the season of darkness, it was the spring of hope, it was the winter of despair.”

Above is the now-famous quote from the Charles Dickens novel A Tale of Two Cities. Whilst the book (and the subsequent quote) came to us in 1859 and exposes the duality of the human experience. Whenever I come across it, I can’t help but think of African inequality.

This inequality is well documented – in 2021 the World Inequality Database revealed that the wealthiest 10% of the population in African countries controls more than half of the total income generated by all the countries in Africa combined (on average) and the income earned by the bottom 50% of the African population (half the continent) is roughly 1/6th of what the top 10% earn. “It was the best of times, it was the worst of times.” 

Inequality in Africa manifests in different ways and in Angola the real estate market brings this harsh reality to the fore. On one end of the spectrum, you have apartments priced at US$10 million – the most expensive in Africa at the time and properties that real estate agents describe as having an “exclusive price for exclusive people”. On the other hand, more than half the population (53%) earns below the poverty line (US$3.65/day) and only 48% of the country has access to electricity. All of this made us wonder – what drives Angola’s real estate market creating opportunities for such luxury and what does the rest of the market look like away from the glitz?

What drives the demand for housing?

The biggest driver of demand for housing in Angola historically was caused by civil conflict in the country. The country was embroiled in civil war between 1972-2002 and prior to that had, the war of independence had raged on for 14 years (1961-1974). Demand for housing had essentially been growing for four decades and supply had in no way kept up. To put this into perspective, in 2009 the deputy governor of Luanda revealed that the City built to accommodate 300,000 people was playing host to 8 million citizens instead. To add to the complexity of the country’s housing problem was the mass-urban migration that had started taking place after the war. The trend saw Angola become one of the world’s fastest urbanizing countries with 62.5% of the population living in cities by 2015. Today that number has grown to 68.9%.

“Because of accelerated urbanisation, land occupation and construction of housing in cities has happened without adequate planning and low infrastructure capacity.”

Centre for Affordable Housing Finance (CAFH)

This pent-up demand and mass migration mean Angola’s cities have subsequently suffered from land and housing market distortions caused by poor land development policies, slow provision of infrastructure and services and poor land information systems. 

Access to land and housing has become even more difficult to attain for the urban poor and most have resorted to acquiring land they consider to be their own through informal mechanisms whose legitimacy is sometimes thought to be legitimate but at other times considered illegal. This informality has made it hard to address the housing shortfall as financing and financiers are hesitant to invest in such contexts. Banks are unwilling to provide loans unless a clear land title can be demonstrated.

The biggest negative of this informality (along with the country’s poverty) is that banks are not interested in giving out mortgages. In 2017, the Centre for Affordable Housing Finance reported that Angolan banks rejected 86% of housing loan applications and only 4 out of Angola’s 26 commercial banks were offering housing loans at that time. The small percentage of loans approved and finance secured services the upper-end of the market and explains how a country that had nearly half of its population living in slums (48.6%) in 2018 could also have the aforementioned US$10mn apartment and luxury housing. It was the best of times, it was the worst of times…

Poverty, income inequality and lack of employment for the youth (who make up half of the population) are also important factors affecting access to housing. A 2022 National statistics study revealed that 80.7% of the economically active population worked in the informal sector. This informality has spread to settlement with the last census, conducted in 2014, revealing that 87.2% of housing is self-built. A separate study by Finscope in 2022 estimated that only 26% of homeowners declared that they have legal title to the land they built their houses on.

Naturally, this begs the question – what efforts have been made to meet this demand and how successful have the efforts been?

Efforts to confront the housing gap

Most of the efforts to provide housing within Angola have been spear-headed by the government as private-sector and banks have been too apprehensive to dip their toes. This is both from a policy and financing standpoint.

In 2006, an official housing policy was approved guaranteeing the universal right to housing. The Framework Law for Housing (Law 03/07) was subsequently passed to promote public and private housing policies through;

• The definition of new criteria for human settlement and the construction of new neighbourhoods and cities,
• regulation of a system of fiscal incentives,
• regulation of a system of credit for housing,
• promotion of raising public or private funds for housing,
• promotion of public or private partnerships in the field of housing,
• guarantee of urban security, access and infrastructure,
• control of urban sprawl by consolidation of the urban and rural identity of the country.

The following year the government ordered the creation of state reserves for the construction of new cities within the capital metropolitan region.

In 2008, housing became a public policy focus when a National Housing Development (NHD) program was unveiled with the goal of building one million housing units by 2015. The NHD program would engage the state taking 11% of the responsibility. Private sector (12%), cooperatives (8%) and owner-builders (68%) were expected to take up the rest of the burden of delivering the housing units:

• 115,000 dwellings – intended for the public sector (11.2% of the total),
• 120,000 dwellings – intended for the private sector (12% of the total),
• 80,000 dwellings – intended for cooperatives (8% of the total),
• 685,000 dwellings – intended for self-built homes (265,000 rural and 420,000 urban homes, or 68.5% of the total).

A National Housing Fund was established in 2009 as one of the many mechanisms to help develop the housing market. Private real estate operators had been advocating for mortgage legislation to free up private financing within the sector. The hope was this would provide commercial developers the confidence to move further down-market where substantial demand existed.

The state did actually meet (and exceed its own target). CAFH highlights Chinese credit lines as the reason why Angola was able to deliver close to 120,000 units by 2015. It was revealed in 2011 that Angola’s housing program had US$4bn in funding and US$2.5bn was obtained through a Chinese credit line. Israel also provided credit to the tune of US$1bn with the remaining US$500mn was from the national budget. Whilst the state met its target and the houses were built, most of the units remained empty because the majority of families simply couldn’t afford to pay for rentals or buy them outright due to a lack of financing. One of the many ways the state tried to prop up the market includes a rent-to-purchase scheme unveiled in 2013.

The state offered 3% interest rates over 20 years for state-built apartments and housing units. Many of these state-financed units received a further discount on their selling price (by as much as 70%), to bring apartment ownership within the reach of middle-level civil servants.

Beyond the states efforts, housing cooperatives have also had a role to play in address the housing shortfall, though this has been the least effective solution;

All these efforts meant that by 2015 the state had met and exceeded its goal of delivering 115,000 units, with 151,800 units complete by then. The problem was that the other sectors of the country hadn’t delivered. The private sector only met 32% of its target resulting in 45,600 units being completed by 2015. The assisted self-help initiative meant to deliver 685,000 housing units ended up being the least effective path – though figures of completed units are hard to find. All things considered though – these numbers were a far cry from addressing the 2 million housing unit shortfall and required a change in approach.

Last year, Angolan president João Lourenço announced that the government would stop building houses and instead focus on crafting policies that encourage private players to step up and enter the housing market. This move comes as no surprise as in 2021, Angola’s ratio of mortgages to GDP (household debt) was alarmingly low (0.08%). The ratio of mortgages to GDP is a metric indicating how much a country’s total mortgage debt contributes to its overall economic output. A low ratio (as that of Angola’s) suggests a limited mortgage market. For context, South Africa had a ratio of mortgages to GDP of 15.79% in 2023 – nearly 200 times more than that of Angola. In the developed world, the USA’s household debt was at 73.7% in the third quarter of 2023.

This lack of a mortgage market is now trying to be addressed – in 202 the state unveiled a National Bank of Angola (Banco Nacional de Angola) (BNA) initiative to encourage commercial banks to offer lower-cost housing loans. Some of the changes from this policy include a maximum interest rate of 7% on home loans until 2032. Construction loans will have 10% interest rates until 2027 along with a requirement for banks to clearly outline their home loan information on their websites in a bid to promote transparency and competition. It’s still too early to know the effectiveness of the measures but they do highlight how the issue of housing is still one Angola needs to address. 

As of 2023, the World Bank estimated the housing shortfall to be in the region of 2.2 million units. It’s also been revealed that only 9218 building licences were approved across the country between 2015 and 2021, thus it’s fair to suggest that no meaningful progress has been made since the programs outlined prior to 2015. The official statistics agency revealed that of 15,975 sites inspected, only 861 were active in 2021 suggesting that construction was also on the decline.

What blunted the efforts to address the housing crisis?

“The single greatest factor in reducing the price of housing is the provision of serviced land and major infrastructure. Simply stated if you build a road, provide access to water, electricity and sanitation in the right location, housing will follow.”

REVIEW OF REAL ESTATE FINANCING IN ANGOLA | USAID 

USAID in 2010 highlighted that the level of infrastructural development in Angola was one of the biggest bottlenecks to development. As of 2023 infrastructural development is still lagging behind other countries in the region;

• 48.2% of Angolan population have access to electricity (#10 among SADC countries),
• 57.7% of Angolan population have access to basic drinking water (#14 among SADC countries)
• 52.2% of Angolan population have access to basic sanitation (#6 among SADC countries)

Source: Angola Digital 2024 (Kepios Analysis)

In 2020, Afrobarometer indicated that only 19% of Angolan households had piped water connections and only 54% had electrical connections. The domino effect of such infrastructural gaps is a scenario where individuals building homes in areas without access to the above infrastructural services have to incur additional costs to ensure that they have access to these services. 

Beyond the above, there are still other bottlenecks that are currently holding the Angolan housing market back. Angola has one of the slowest times to register a property in the world, taking an average of 190 days (6 months). Compared to 6 other countries in the SADC region, Tanzania was the 2nd slowest taking 67 days (2 months). The only redeeming positive in this regard is that the cost to register properties in Angola is one of the lowest in the world at 2.7% of the total cost of property.

The World Bank’s Quality of Land Administration Index also ranked Angola quite lowly with the country scoring 7/30 back in 2020. The index measures five dimensions: reliability of infrastructure, transparency of information, geographic coverage, land dispute resolution, and equal access to property rights. Angola in particular was highlighted as one of the countries that had a procedure-heavy property registration process as property owners have to;

1. Obtain an updated tax certificate from the Tax Office (150 days),
2. Obtain an updated ownership certificate from the Registry (7 days),
3. Pay transfer tax (Sisa) (7 days),
4. Execute the deed of transfer before a notary public (7 days),
5. Receive definitive registration from the Real Estate Registry (21 days),
6. Apply for definitive registration at the Tax Office (5 days)

Some of the problems highlighted by the World Bank in regard to Angola’s property market include;

• Lack of an electronic database for checking property usage limits (liens, mortgages, restrictions and the like),
• Absence of an electronic database for recording boundaries, checking plans and providing cadastral information (geographic information system),
• Information recorded by the immovable property registration agency and the cadastral or mapping agency are kept in separate databases,
• Absence of publicly available statistics on the number of land disputes at the economy level in the first instance court?
• These are only a few examples of some of the shortfalls of the property market with many others highlighted.

In fairness, the country has already started looking to address these shortfalls. In 2022, a presidential decree was launched to promote the adoption of digital and simplified administration services. One of the core focuses of the decree is to speed up responses to public enquiries and improve the accuracy of documentation. The country also introduced an integrated land registry system reducing the aforementioned registration processes from six to two and fees for obtaining a land registry certificate online were reduced by 91%.

Whilst Angola still needs to address many of the housing gaps that were present 22 years ago, it appears that the state is finally tackling many of the policy gaps that proved to be a bottleneck within the housing market. Just how much of an effect this will have is yet to be seen but there is progress being made. It is the best of times, it is the worst of times…