More Developers Venturing into the Country’s Lucrative Real Estate Sector

By Vera Shawiza / November 14, 2016




Housing supply is expected to increase in Nairobi as developers aim to tap into this lucrative sector as house prices continue to rise across the country.

According to the Kenya Bankers Association (KBA) Housing Price Index report for the 3-month period ending September, there has been a 2.2 percentage growth on house supply as compared to the 1.7 percent growth which was recorded in the previous quarter.

While the report supports Hass Consult’s Q3’2016 Property Price Index findings on price increase during the quarter, it differs from the latter that recorded a 1.2 percent growth, slower than the 4.0 percent rise in Q2’2016. 

Below is a graph showing the prices increases quarter on quarter;

house-price-change

Source: Cytonn Report

Key takes from the KBA HPI report were as follows;

  1. Buyers have shown consistency in preference with the greatest factors influencing price movement still being house size, including number of bedrooms, bathrooms and presence of detached staff quarters, security and privacy, and proximity to social amenities,
  2. Apartments had the largest share of market transactions at 58.6 percent, while maisonettes and bungalows accounted for 24.3 percent and 17.1 percent of total sales, respectively,
  3. Apartments had the largest number of transactions in lower and middle income markets. In particular, apartments in middle income areas such as Kiambu Road, Waiyaki Way, Langáta and Ngong Road recorded a 3.4 percent price change during the quarter compared to high end areas at 1.8 percent. This can be attributed to their affordability and therefore they are preferred by the low and middle income earners. The slow rise in apartments’ prices in the high end areas is due to relatively slow uptake indicating a possible oversupply in this market
  4. Maisonettes, on the other hand, recorded the highest price movement at 4 percent in high end areas such as Kileleshwa, Kilimani, Karen, Garden Estate and Muthaiga, driven by the high-net worth clientele in these areas.

According to Cytonn Investments, they stated that their view on the same was that the continued house price increase indicates sustained demand for housing. As developers put up units in response, we are likely to witness increased focus on the lower income segment that remains largely unsupplied.

In addition to demand, other factors likely to positively impact real estate as an investment include;

  1. Tax incentives for development of at least 400 low cost units, now at 15 percent,
  2. Financial Support – The banking industry has supported home acquisition and development through enabling access to credit and improved services. The recent capping of interest rates will also give potential borrowers incentives to seek mortgages, and,
  3. High returns – Real estate has consistently outperformed other asset classes, with returns of up to 25 percent making it attractive to investors. This is from rental yields ranging from 6-12 percent for different real estate themes, and high price appreciation, especially for those who invest at development stage.

According to Cytonn, other projects, the 300 billion shilling Public-Private Urban Renewal Project involving development of more than 14,000 units in Ngara, Pangani, Ngong Road and other areas in Nairobi, is set to begin in January 2017. Developers will however need to put emphasis on research to determine the appetite for housing depending on regions and the income of the target market.

Related: Global Capital Fuelling African Property Markets



About Vera Shawiza

Vera Shawiza is Soko Directory’s in-house journalist. Her zealous nature ensures that sufficient and relevant content is generated for the Soko Directory website and sourcing information from clients is easy as smooth sailing.Vera can be reached at: (020) 528 0222 or Email: [email protected]

View other posts by Vera Shawiza


More Articles From This Author








Other Related Articles










SOKO DIRECTORY & FINANCIAL GUIDE

ARCHIVES

2019
  • January 2019 (256)
  • February 2019 (216)
  • March 2019 (287)
  • April 2019 (254)
  • May 2019 (220)
  • 2018
  • January 2018 (291)
  • February 2018 (219)
  • March 2018 (278)
  • April 2018 (225)
  • May 2018 (238)
  • June 2018 (178)
  • July 2018 (257)
  • August 2018 (249)
  • September 2018 (256)
  • October 2018 (287)
  • November 2018 (285)
  • December 2018 (187)
  • 2017
  • January 2017 (183)
  • February 2017 (195)
  • March 2017 (207)
  • April 2017 (104)
  • May 2017 (169)
  • June 2017 (206)
  • July 2017 (190)
  • August 2017 (195)
  • September 2017 (186)
  • October 2017 (235)
  • November 2017 (253)
  • December 2017 (266)
  • 2016
  • January 2016 (166)
  • February 2016 (165)
  • March 2016 (190)
  • April 2016 (143)
  • May 2016 (246)
  • June 2016 (183)
  • July 2016 (271)
  • August 2016 (249)
  • September 2016 (234)
  • October 2016 (191)
  • November 2016 (243)
  • December 2016 (153)
  • 2015
  • January 2015 (1)
  • February 2015 (4)
  • March 2015 (166)
  • April 2015 (109)
  • May 2015 (117)
  • June 2015 (121)
  • July 2015 (150)
  • August 2015 (157)
  • September 2015 (189)
  • October 2015 (170)
  • November 2015 (174)
  • December 2015 (208)
  • 2014
  • March 2014 (2)
  • 2013
  • March 2013 (10)
  • June 2013 (1)
  • 2012
  • March 2012 (7)
  • April 2012 (15)
  • May 2012 (1)
  • July 2012 (1)
  • August 2012 (4)
  • October 2012 (2)
  • November 2012 (2)
  • December 2012 (1)
  • 2011
    2010
    2009
    2008
    2007
    2006
    2005
    2004
    2003
    2002
    2001
    2000
    1999
    1998
    1997
    1996
    1995
    1994
    1993
    1992
    1991
    1990
    1989
    1988
    1987
    1986
    1985
    1984
    1983
    1982
    1981
    1980
    1979
    1978
    1977
    1976
    1975
    1974
    1973
    1972
    1971
    1970
    1969
    1968
    1967
    1966
    1965
    1964
    1963
    1962
    1961
    1960
    1959
    1958
    1957
    1956
    1955
    1954
    1953
    1952
    1951
    1950