In several African countries, where cheap housing remains a concern for a rising urban population, the price-to-rent ratio has emerged as an important indicator for determining housing decisions.
Both investors and regulators can use the price-to-rent ratio as a guide to the decision of rent vs ownership.
This is determined by dividing the cost of purchasing a property by the annual rent it brings in.
When this ratio is low, more individuals may obtain homes without facing financial hardship because rental rates are often less reasonable in relation to income.
But when high, it typically indicates that it is better to pay rent than to buy a house.
In several African nations that are rapidly becoming more urbanized, rent affordability is especially crucial.
The demand for housing rises as more people move to cities in pursuit of employment and better living circumstances, which frequently results in higher rental prices.
In such cases it is important to consider the option of buying a home instead.
However, in most regions, the financial burden of buying a home is far more overwhelming than just budgeting for rent monthly.
The Price-to-rent ratio helps with this assesment, as it is typically considered better to buy a home if the index ranks from 1 to 15. 16 and above indicates that renting is better.
With that said, here are the 5 African countries with the highest price-to-rent ratio midway into 2024, according to Numbeo.
It’s worth noting that Numbeo’s index focuses on major economic hubs across the continent rather than on the entire continent.
Top 5 major African countries where renting is better than buying a home
| Ranl | Country | Price to Rent ratio city center | Price to Rent ratio outside of city center | Global rank |
|---|---|---|---|---|
|
1. |
Algeria |
35.1 |
31.8 |
11th |
|
2. |
Tunisia |
21.0 |
20.0 |
56th |
|
3. |
Morocco |
20.1 |
20.8 |
59th |
|
4. |
Ethiopia |
16.6 |
22.6 |
74th |
|
5. |
Egypt |
15.9 |
14.3 |
78th |
