- According to Kenya Retail Sector Report by real estate and investment management firm Cytonn Investments, the real estate sector performed better in 2018 compared to 2017.
- The report says that the metrics under consideration, namely retail space supply, retail market performance, retail space demand and market sentiments all returned a positive outlook.
“The handshake was one of the defining moments as it brought a level of political stability into the country. Following that, business has picked up and investors came back to the market,” says analyst Caleb Mugendi.
In 2017, the highly divisive political campaigns, a tension-packed general election, the shocking annulment of the presidential election and thereafter a repeat election that almost half the country boycotted, all threatened to send the country’s economy to hell in a handbasket.
The beginning of 2018 was a turbulent one as well. But enter the famous ‘Handshake’ and many economic sectors, including real estate breathed a huge sigh of relief, and are seemingly performing better.
According to Kenya Retail Sector Report by real estate and investment management firm Cytonn Investments, the real estate sector performed better in 2018 compared to 2017.
The report says that the metrics under consideration, namely retail space supply, retail market performance, retail space demand and market sentiments all returned a positive outlook apart from retail space supply which was neutral. The conclusion was also inspired by the higher yields at 8.6 per cent from 8.3 per cent in 2017, which is supported by the improved macroeconomic environment.
“The handshake was one of the defining moments as it brought a level of political stability into the country. Following that, business has picked up and investors came back to the market,” says senior investment analyst at Cytonn Mr Caleb Mugendi. He is upbeat that 2019 is going to be a bullish year.
On his part, Mr Francis Kihanya, CEO of real estate firm Manyatta Capital says that at the beginning of 2018, as was the case towards the end of 2017, many investors adopted a wait-and-see attitude and thus withheld their money. As a result, there was little activity on the property scene as many construction projects were put on hold and people didn’t buy a lot of real estate because of the uncertainties that came with the political heat in the country.
“2018 started from a point of unpredictability, coming from a long winded electioneering period that had strained out the real estate sector big time. The big sigh of relief came in March when that Handshake happened,” says Mr Kihanya.
Today, we take a look at some of the issues in the property scene that defined 2018 and are worth keeping tabs on as 2019 unfolds.
In 2017, during the Jamhuri Day celebrations, President Uhuru Kenyatta announced the “Big Four” pillars of his second and last term in office, among them affordable housing, consequently setting the stage for what is to become the country’s largest mass housing project since independence. In 2018, the government’s plan to construct 500,000 low cost houses in the next four years has been a major talking point in the property sector.
Commenting on the government’s plan, Mr Mugendi says it is a good initiative because it will cater for those at the low-end of the market who are often ignored by private developers, adding that it has the potential to attract lots of investors into the country looking for partnerships with the government.
“Government foresees this as one of the sectors that will drive growth and take Kenya’s economy towards Vision 2030,” says Mr Mugendi.
Due to the influx of new units in the near future, Mr Mugendi foresees a situation whereby the low cost housing market is going to be disrupted in a good way, such that prices of homes will be brought within the reach of many low income Kenyans.
“Going forward, if this initiative succeeds, land prices, a factor that has been the greatest impediment to housing will be checked, enabling Kenyans, especially those in urban centres to own a roof over their heads,” notes Mr Mugendi.
Land prices to go down even further
Yet another advantage of the government’s direct involvement in provision of social housing, Mr Mugendi says is the ability of such a move to bring down the cost of land, as a result of government releasing parcels of land it has been sitting on for ages.
“We have actually seen the prices of land come down in 2018. We expect that trend to continue in the 2019” offers Mr Mugendi.
Reduction in State Bureaucracy
While addressing stakeholders in the construction industry during the inaugural Construction Industry Awards (COINA) 2018 at Carnivore Restaurant in August this year, Mr Charles Hinga, the Housing PS, intimated that at least 35 legislations, some on procurement, were set to be repealed in a move by the government to put on course the plan to realise the affordable housing dream.
Consequently, during this year’s Jamhuri Day celebrations, the President, while outlining the progress for the ‘Big Four’ agenda, gave cutting down State bureaucracy by establishing appropriate laws and policies that would provide the platform to transform the housing sector, done in the past 12 months as one of the progress made.
Still, experts in the real estate sector feels more needs to be done in terms of streamlining government policies in the housing sector in order to fast- track the agenda.
Interest rate cap