Kenya’s real estate sector growth has worryingly been dwindling at an alarming rate owing to the recent economic trends both locally and internationally.
Barely had the dust on interest rates cap and Brexit settled when we moved into an election period with no end in sight.
HassConsult research findings found that in 2017 the opportunities to buy properties and then sell them at a handsome return are progressively becoming difficult to get as prices become static over the last few years.
Also, owing to the stout economic environment, the value of building plans approved by the county authority dropped by 16 per cent in the first quarter of 2017 compared to the same period in 2016.
Total value dropped to Sh105.7 billion from Sh126.3 billion last year, indicative of a slackened construction activity in 2017.
The writing is therefore on the wall, the real estate sector is on a downward trend unless strategic economic decisions are put in place to even it out.
In an effort to save this, the rule of the thumb is to stop and re-strategise.
“When you find yourself in a hole, stop digging”. In this case, digging would mean a reduction of further developments of housing that do not match demand, which is the greatest problem the sector is currently experiencing.
A keen analysis of the Kenyan demand for property in real estate portals like Property24 has time and again exhibited an unmatched national thirst for low-priced and affordable housing.
This is vis a vis the sporadic increase in housing developed for the upper-class market. For instance, there are 70 per cent more visitors on property24 who filter apartments less than Sh10 million compared to those that are not price sensitive.
Agents and developers listing the former have month by month continued to make a kill, to the benefit of the investors.
The causal problem is that developers have unwittingly established high priced housing (In Kenyan terms) that have remained on the market for quite some time.
In light of the above, the government, which is the major stakeholder in a sector that contributes nine per cent to the country’s GDP, owes its urgent efforts to set ship back afloat.
For starters, developers within the “Affordable and low-priced housing” category should momentously be incentivised. This could be in form of tax exemptions, tax reductions to loan guarantees.
In conjunction with county government and various interested stakeholders, they can offer to develop amenities like boreholes, feeder roads to offset the total cost to developers. This in turn, would be reciprocated to the buyer who would get an opportunity to access affordable housing.
Lastly, there should be a shift in mindset from “You can’t go wrong with real estate”. Its on this unfounded premise that anyone with ‘money’ inadvertently uses to invest in the sector.
The consequence herein is an increase in all manner of housing that do nothing to alleviate the real issue; Insufficient Affordable Housing.
Githinji wa Muhoro, customer relationship manager, Property24 – Kenya, via email
PAYE Tax Calculator
Note: The results are not exact but very close to the actual.
