A benchmark guide to help you find the best home you can at the best prices with the least risk.
It would probably be difficult to make buying a home more complex in Addis compared to most markets around the world. There is little supply for enormous demand, buying power is very unevenly distributed, the regulatory framework is uncertain, much of what you can buy is for future delivery, no mortgage support and so on and so forth.
Given the above, it is nothing short of amazing that the real estate market here is as strong as it is. But the key is that the demand for homes in every segment of the market is much greater than the supply is today or likely will be for some time to come.
Something else that is problematic in the market here is the lack of comprehensive market information leading to pricing disparities between different types of homes, locations, features and so forth. Although listing services are launching here and there (including our very own KeysToAddis.com), it is still early days for them before they hold the volume of data which will make them much more useful further down the line.
This all means that you had better be well prepared for making your real estate purchase so you don’t end up overpaying for it and perhaps even much worse. So we urge you to heed the following advice at a minimum as you embark on the search for your perfect home.
Why are you buying?
Different objectives imply different requirements. If you are buying for rental yield then that calculation should have a big impact on your approach. For example, apartments tend to have better rental yields on average than villas whereas if you are going to live in it, you might be more interested in having a garden which would preclude an apartment obviously. In any case, run through the main objectives you want to accomplish with your purchase as this will normally play a big part in shaping your eventual decision.
- Investment for rental yield?
- Living in it?
- For your kids?
- Waterfall purchase?
- Protect your hard earned money from inflation and/or devaluation
The last point is something everyone with cash on their hands should think about. Because both factors are a fact of life in Ethiopia. And buying real estate is one of the best ways to protect against the loss of value in Ethiopia’s currency by whatever means.
What’s your Budget
Set your budget early including the maximum you can possibly afford and your ideal price point.
- While you’re doing this, try to have some sense of whether you may have access to payment modalities (e.g. bank employees enjoy some of the most favorable mortgage terms and availability and in some cases NGOs & private organizations may offer some level of support) that can extend what you can afford.
- The two measures of affordability in such cases are the deposit and monthly payments required
- When trying to figure out what you can access and afford in terms of mortgages, consult an expert or read our online guide to mortgages which we update from time to time.
- Setting your budget should be aligned with what the market has to offer and to help you with that, we will provide you with a brief primer a bit later on. It won’t be much good to do so if your budget isn’t realistic. We get a lot of calls from buyers looking for completed, good quality 3 bedroom apartments in the middle of the city for 2-3 million birr. No such products exist in Addis today.
Location is a big driver of pricing and that will be one of the factors you will need to keep in mind as you decide on the home you wish to purchase. With that in mind, below is a selection of currently available apartments on the market right now to give you a sense of pricing ranges.
|Location||Size (m2)||Area Type||Price (millions, birr)||Completion Status||Finishing||Price / m2|
|Bole Millenn||126||gross||5,600,000||70%||Very good||44,444|
|Bole Millenn||120||gross||7,200,000||50%||High end||60,000|
Apartment, townhouse or villa
This decision may go hand in hand with setting your budget. is the type of real estate you want to buy. Even if you have the flexibility to consider all types, prices and availability will play a big role. But before you even consider those, think back to the primary purpose of your investment. For example, if your primary goal is rental income, you are probably better off looking for an apartment. If long term appreciation is your goal, then a villa with the largest compound you can afford might be the best answer. How and where you will shop, depends to a great extent on your preference of what type of property you wish to purchase. While we’re on that topic, townhouses are not too common in Addis (especially new) although we happen to have just a few in our inventory right now.
New, Pre-Sale or Existing.
This decision also goes back to the reason why you are buying a home. If your purchase is to move in right away than you are going to look at new homes that are 100% complete or existing homes. On the other hand, if this is an investment property you are better off looking at pre-sale units that will be ready in a year or more, giving you time to periodically pay off the purchase. A variety of implications result from this including how much of the purchase price you may have to pay up front (100% being the starting point), the level of risk involved and your choices in the market.
Reducing Your Risk
It may be the case that location, location, location may be the flagship phrase used around the world for the three most important factors one should consider when buying a home. We think there’s a co-equal alternative in this market for certain types of purchases in Ethiopia. And that is ‘Delivery, delivery, delivery!’
If you’re buying a home under development for future delivery, there are some criteria you should consider to reduce the risk of delayed delivery (and sometimes even worse) – a common problem in the industry.
Basic checks you should make include reviewing the seller’s Commercial Registration, Business License, Lease or Freehold title deed and building permit. Outside of that, it is of course helpful if construction progress is at an advanced stage and if there are already individual title deeds for the unit you are purchasing. In our experience, financial management is the biggest differentiator to a project’s delivery prospects which is something you should try and get some sense of when talking to a developer. Finally, be sure to carefully review the sales contract which should be detailed enough to include finishing specs, delivery timeframes and what happens in the event of delays.
Features & Amenities
Make a list of the features (or use our handy guide which we also use to develop design requirements for new projects by market segment) you absolutely must have, would like to have and are completely optional. Try to assign a monetary value to each feature – for example, how important is having maid’s quarters in an apartment for you? Balconies? Bathtub? Guest bath?
|Feature||Requirements||Buying Option 1||Buying Option 2||Buying Option 3|
|Living space balcony||Must have||Yes|
|MBR balcony||Must have||Yes|
|Balcony louvers||Nice to have||No|
|Window louvers||Nice to have||No|
|Trash chute||Must have||Yes|
|Washer/Dryer hookups||Must have||Yes|
For a full table you can fill out yourself, drop us an email at info@PresidioEthiopia.com
The bottom line is that such features can have a significant impact on prices. For instance, maid’s quarters in an up market unit may imply an incremental cost of up to ETB 500,000 on a unit. So you should have a good awareness of your relative preference for a variety of features and amenities.
This is much harder than it ordinarily should be because the vast majority of buying options from developers are presold – sometimes as early during foundation work. That means you won’t really have an exact idea of what you’re purchasing, relying instead on floorplans, 3D images and seller representations of what the final product will be like.
- Be aware of how a developer is calculating sizes for apartment units in particular. Most use gross floor area which includes not just your apartment (slab area) but a portion of common areas as well. The difference sizes as well as calculated prices per square meter can be very significant so make sure you’re comparing with the same metrics. For more on this topic, refer to another article on our website, The Area Game.
- Finishing is another area where significant variations can be observed. Semi-finished means you’re likely to just get a white box interior with just windows and exterior door while some developers will provide everything but kitchen cabinetry and cupboards. A few will provide everything including kitchen appliances. The point is you should have a very good idea of what each offer includes.
- Finally, the qualitative aspects of finishing materials can also vary dramatically. For example, the term parquet can be used to describe everything from wood grain vinyl or ceramic flooring costing a few hundred birr per square meter to solid hardwood floors that can cost a couple thousand (plastic tiles, ceramic, porcelain, MDF, HDF, engineered wood and solid hardwood are all potential flooring options). Similarly, countertops of granite or quartz are better than formica to withstand years of heavy use beautifully.
You can probably tell by now that it would be a good idea to have some professional help on your side to assist your navigation of Addis’ rather dynamic real estate industry. An agency which has visibility into both developer products and the secondary market is your best bet to give you a comprehensive view of the market. Experienced brokers are also good to work with particularly around specific areas of Addis if you’ve already decided where you want to buy. If nothing else, link up with a family member or a friend who has recently purchased a home in order to share from their experience. Listing services can also help in giving you a sense of the market and especially in the case of secondary market homes, by giving you the ability to see images of properties without actually going to see them.
Happy shopping! And let us know if you would like us to provide more information about the shopping process either in our comments section or contacting us directly via email, phone or a visit.