Flats under construction at Lolwe estate in Kisumu. Residential developments have registered high returns in the past few years. Photo/File
What you need to know:
The Kenya National Bureau of Statistics (KNBS) shows an average growth of 2.87 per cent in the first three quarters of 2012 compared to 3.93 per cent rise in 2011.
Knight Frank’s property index shows that prices in Nairobi and the Coast have outstripped other cities globally captured in the index like New York.
New blocks of flats or town houses have been coming up every other corner in the past two years.
Old stand-alone bungalows in some of the city suburbs have been replaced by these new developments, which are not limited to residential use.
This has mainly been driven by a lot of interest from both local and foreign investors seeking a piece of the real estate sector, which has been at its all-time high.
Tracking growth of what has become a lucrative market, the Kenya National Bureau of Statistics (KNBS) shows an average growth of 2.87 per cent in the first three quarters of 2012 compared to 3.93 per cent rise in 2011.
According to data from the report, 2011 was the best performing year in real estate, but the rise last year 2012 is expected to surpass it.
HassConsult, a real estate consulting firm, recorded the highest returns in residential developments in 2012. In its report looking at the market performance, the average rental price for apartments in the city went up to Sh66,987 from Sh21,638.
Knight Frank’s property index shows that prices in Nairobi and the Coast have outstripped other cities globally captured in the index like New York.
All factors held constant, lenders and investors are optimistic about this year and are confident the market will perform its best. Among the factors raising their hope is County government transition. Already eyes are fixed on office and housing facilities construction in the 47 counties.
So, is real estate worth venturing for investment this year? For starters, real estate players are foreseeing demand of mortgage facilities due to interest rate cuts.
Joram Kiarie, Managing Director S&L, an arm of Kenya Commercial Bank (KCB), said investors are keen to cash in on county developments through plot purchases and construction. These investors are expected to be the first to knock on lenders’ doors.
The county system of government will see increased participation as investors troop to new urban centres to kick-start development. Residential homes and office suites are two types of constructions lenders say investors will concentrate on.
This is in a bid to boost supply of those facilities in meeting the increased demand, especially from civil servants and businessmen.
It therefore goes without saying, that investing in land or property in counties will be a good bet for 2013.
For investors banking on counties, this year is the best because the price are moderate. However, demand and speculation is expected to raise the prices of land in major towns.
The transition to county government will not affect developers in major towns. Analysts predict continuation of real estate activities from last year. However, investors hoping to carry out investment in the city will have to contend with soaring land prices, land scarcity and speculators.
This year, players say, buildings will go higher like the NextGen Park, off Mombasa Road.
Kilimani is already seeing similar developments, to the chagrin of the local resident association.
But aside from the economy in land use, sky-scrapers are selling the view of the city skyline to home owners. Lenders are encouraging investors to consider modern building styles like high-rise buildings to capitalise on space and gains.
Luxury and high-end constructions is indeed for wealthy investors. Small investors have a hard time breaking through. However, low-income housing development is an area they can explore.
Demand
As opposed to luxury developments, low and middle income housing cost less and attract huge demand from upcoming professionals.
According to real estate watchers, 2013 will see demand in new units as a result of a new work force, increased middle class characterised by working couples seeking to own homes and international firms settling on Kenya for their regional hub.
Thus, investment in this sector is valuable. Land purchase for speculation is another option.
But just in case you hold big dream and are seeking to make a big difference with little, Real Estate Investment Trusts (REITs) might be the right vehicle for you.
REITs make it possible for small investors to share a pie in the inn property boom through shares held. Therefore, if you are thinking of being part of landmark developments, look out for this product. It is expected to be out early in the year.
Optimistic
Should real estate investors worry about the upcoming general elections?
“Election or no election we need to house Kenyans. The population is growing and it is obvious what happened in 2007 is still live in our minds but it will not stop the economy,” said Mr Kiarie.
Every investor and businessman is aware of upcoming elections, but the market seems to only have it at the back of their mind. Lenders and developers are optimist election will do little to upset the market.
