Sultan Palace raises coast property prices as investors spot upcycle in bear run

By / Published April 22, 2015 | 7:31 am



Property-Market

Sultan Palace Beach Retreat has seen prices for its coastal villas rise by more than 10 per cent since January this year, driven by counter-cyclical investors keen to buy into coastal property during the current bear market.

With finite development capacity along the Kenyan coast, rated as one of the most beautiful coastlines globally, and limited current development activity, Sultan Palace is currently developing 50 coral stone beach houses, 16 villas and 132 condos due for completion at a time when a coastal accommodation shortage is predicted, following a stream of hotel closures

For investors keen on avoiding the whipsaw effect of buying and selling at the wrong time, driven by the herd mentality that has typically characterised Kenya’s property scene, the current limited developments at the coast present the possibility of high future returns for those with their eyes set on the long term.

Global findings indicate that every time markets take a significant fall, investors who bought on the dip, known as a bear run, reap profits on the bounce when mass interest kicks in.

Currently, Kenya’s hospitality industry is projected to be heading towards its all-time lowest, with hotel occupancy levels in 2015 and 2016 expected to fall below the 53 per cent mark, according to the 2014 PwC Hospitality Outlook Report. As tourism is one of the biggest drivers of commercial real estate at the coast, prices are expected to continue their dip alongside the slump in tourism, which was sparked in 2012 by a decline in tourist numbers from Kenya’s traditional, largely European market due to the euro crisis, political uncertainty and travel advisories.

This has opened an opportunity for those seeking appropriately-priced property, which is expected to appreciate immensely once the tourism industry starts to pick up.

 This sees Sultan Palace Beach retreat in Kikambala, Kilifi County, as a family resort based around coral villas and apartments and a centrepiece waterpark, stand out as a close to unique investment option to ride the industry’s predicted future return to its former glory.

“The decline in tourism numbers has adversely affected Kenya’s tourism levels, but this is only a short term occurrence. We have invested in Kenya, and specifically at the coast, because we believe that the country still has the potential to return to its glorious days, sooner than many think,” said Liu Tiancai, General Manager Sultan Palace Development Limited.

The equation, says Liu, is as the words of investment guru Warren Buffet: “the time to get interested is when no one else is”. This, according to the investment veteran, is the key difference in investor returns between early adopters and trend followers, with early investors reaping the highest gains on value as soon as demand starts to spike. Buffet stands as one of the world’s most successful investors, having consistently spotted counter-cyclical investment opportunities.

But already, some investors have spotted the expected upcycle in Kenya’s tourism industry.

 A pre-construction rush has already seen Sultan Palace’s villas experience an upsurge in price to Sh72m, up from the opening price of Sh65m in January, with most of the villas now sold.

Furthermore, PwC forecasts that in 2015 the hospitality industry in Kenya is set to experience a 0.6 per cent rise in average room rates for the first time since 2011, despite a decline in unit nights, and reach an historical high of $163 per night by 2018. An expected rise in tourism numbers, driven by the rising economic potential of Kenya’s middle class and a projected sustained GDP growth of over six per cent, according to the PwC Hospitality Outlook Report, offers bright prospects for investors now building for launches in between 2016 and 2018.

The Kenyan coast continues to rank highly internationally as an outstandingly beautiful and highly rated tourist destination. The 2015 TripAdvisor Travellers Choice Awards ranked six hotels at the coast – two from Kilifi County – among the top 10 in the country based on choices made by travellers around the world. The accolades garnered by the developments at Kilifi County have come as a boost to the region’s hospitality industry, and are expected to spur further investment in the region in anticipation of the future prominence of Kilifi as a holiday destination.

Sitting on 43 acres along a 700-metre stretch of exquisite sandy beach-front property, Sultan Palace Beach Retreat aims at meeting the growing demand for holiday homes in Kenya by both local and foreign holiday seekers. In addition to the holiday homes, the beach retreat will feature a waterpark for children and a residents’ club with first-in-class leisure facilities and an unobstructed view of the ocean.

In its second phase Sultan Palace Beach Retreat will feature a five-star hotel managed by a leading hotel brand.






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