Zanzibar, Dodoma lead with highest property returns

By Guardian Reporter , The Guardian
Published at 08:50 AM Jun 14 2024

An illustration of rental yields in Tanzania
File Photo
An illustration of rental yields in Tanzania

DODOMA and Zanzibar have been ranked as top ten cities with the highest rental yields in Africa, the factor that may become a magnet for property investors across the world.

The findings by, the property investment specialists, released recently show Zanzibar is being ranked 7th, behind Lagos, Lubumbashi, Dire Dawa, Kinshasa and Younde, while Dodoma, the country’s capital city, is being ranked 9th.

The yield for two cities are more than double of the national average of 5 percent, the findings show, although according to Numbeo, world's largest database of user contributed data about cities and countries worldwide, the rental properties in Tanzania offer gross rental yields ranging from 0.0 percent and 2.7 percent.

According to the findings, which were compiled from official reports and statistics available on government websites, IMF and World Bank, rental yields in Zanzibar is ranging from 12 to 15 percent, while Dodoma ranges from 11 to 14 percent.

The rates in Zanzibar and Dodoma are also highest than 2 percent in Dar es Salaam and Kampala, 10 to 13 percent in Johannesburg and five to eight percent in Addis Ababa.

Lagos, the commercial city of Nigeria, has the highest rental yield of between 43 and 46 percent, followed by Lubumbashi in Democratic Republic of Congo (DRC), which its yields range from 20 to 23 percent, and Dire Dawa city in Ethiopia is third with the yield of 14 to 17 percent. findings report has therefore recommended that Tanzania is a conducive country for investors in property market, due to its stability and strong economic growth.

“If you want to invest in properties, prioritize stability, as it safeguards against economic downturns and minimizes volatility,” it says.

“These days, Tanzania is experiencing a notable degree of stability. The last Fragile State Index reported for this country is 78.2, which is an acceptable number.”

The report notes that Tanzania benefits from strong political leadership and a stable democratic system, which has helped to create a peaceful environment and foster economic growth. 

Additionally, the country has maintained strong international relations, which has helped to maintain peace and stability both domestically and abroad, with strong economic growth prospects.

According to the IMF's estimations, Tanzania will end 2023 with a growth rate of 5.2 percent, which reflects the country's accelerated progress. As for 2024, the experts say the economy is projected to grow at the rate of 6.2 percent.

“That's not all - this impressive growth will keep going on since Tanzania's economy is expected to increase by 28.1 percent during the next 5 years, resulting in an average GDP growth rate of 5.6 percent,” the report notes.

“The expected massive growth in Tanzania is a very good thing for someone who wants to invest in real estate because it indicates a strong economy and increased demand for housing, which can lead to greater returns on investments.”

The growth of population and increase of GDP per capita have also been identified as the factor that will ensure good returns for property investors.

“A growing population means more people needing homes and higher GDP per person means people have more money to spend on housing, which can lead to increased property value over time,” it says.

“In Tanzania, the average GDP per capita has changed by 4.5 percent over the last 5 years. Despite being minimal, there is still some observable growth. Furthermore, the Tanzanian population is growing (+3 percent in 5 years).”

The demand for rentals is also likely to go up in other Tanzanians cities, such as DDar es Salaam and Arusha, in 2024.

The report further says the year 2024 presents a potentially advantageous window for property investment in Tanzania, driven by several favorable factors. 

In Zanzibar, an investor who purchases real estate in the country can obtain a residence permit for two years, famously known as the “Golden Visa.” The investor will receive a residence permit Class C visa for a fee of USD 500 if not a citizen of the East Africa Community states and  USD250 for East Africans and the diaspora. 

The qualifying conditions for such a Golden Visa are; the value of the purchased property should be above USD $ 100,000, and the application shall be coupled with an endorsement by the Zanzibar Investment Promotion Authority (ZIPA). 

The granted permit covers the investor(s), their spouse, and up to four children below 18 years of age.  It is worth mentioning that, this applies only to the designated projects approved by ZIPA.

However, legal experts have identified legal implications on land ownership and investment of which the government need to take measures to address barriers to allow foreign investment in property market.