Key Market Trends Shaping The Future of the Kenyan Real Estate Market

Against all the odds of post-election uncertainties and inflation rates that would hike construction costs, the Kenyan real estate market managed to notch a 9% growth. In fact, according to reports, no major real estate development was commissioned in the most of 2017. But despite a near hiatus in the upscale end of the market, the semi-detached houses niche and other similar niches were recording significantly progressive sales figures. And these are set to continue flourishing into the coming years. Together with this, the following is a rundown of four key trends set to dominate the Kenyan real estate market in both in the short and long run:

Uptake from High-Net-Worth Individuals

According to the half-year report for 2018 released by Hass Consult, investor confidence is building up the most among high-net-worth individuals, who’ll be the key drivers of sales in the Kenyan real estate market. The bolstered confidence in the prospects of Kenyan real estate industry has caught on in the fold of high-income investors more than it has in the fold of investors who fund investments through loans.

Sustained Downward Pressure on Precolonial Districts and Satellite Towns Around Nairobi

The real estate markets in these locations have remained relatively unscathed after the last four boom and burst cycles of Kenya’s real estate market. These neighborhoods have unrelentingly maintained coveted spots among Kenya’s best performing areas in terms of property sales. The uptake of apartment units in South B, South C, Ruaka, and Kilimani was at 26.6% during the first half of 2018. Other similar locations include Ngong, Ongata Rongai, Juja and Ruiru. These locations yielded returns ranging from 10.1% – 13.9%.

Uncapped Interest Rates

During his presentation of the 2018/2019 Budget statement, Treasury Cabinet Secretary Henry Rotich announced plans to scrap the interest rate cap instituted in 2016. This, he said, will be done in a bid to stimulate and ease borrowing. But this has raised fears of a possible backlash of returning high-interest rates. Rotich stated that the interest rate cap is a disservice to the bludgeoning credit growth rate, and asserted that the removal of the interest rate cap would strengthen access to financing and enhance the effectiveness of monetary policies.
Although his point of view has drawn heavy criticism, there’s no doubt about the high-impact effects that uncapped interest rates will have on Kenya’s real estate market.

Land Speculation

This has been another flourishing niche in Kenya’s real estate industry. Majority of investors in this niche are going into the final stretch of 2018 with big smiles on their faces, as their land investments have lived up to their bills and proved to be worthwhile investments. According to reports, land remains the most profitable niche in the long run. Land investments spanning the last 10 years have generated returns that are 10 folds of equity returns and yielded more than three-times he returns of bond investments. For instance, in the Upper Hill location, the price of land has increased by 30 folds within the last 20 years, from Sh20 per acre to about Sh600 million per acre presently.