Demand for bulk infrastructure has been a principle driver for developers focusing on high-end consumers in delivering an estimated 35,000 homes each year
Plans being championed by the government on affordable housing took centre stage at a regional gathering during the two-day East Africa Property Investment (EAPI) Summit in Nairobi last week.
Property developers delved into the role private investors can play to make the government realise its promise of affordable housing and the ways and means of making President Uhuru Kenyatta’s dream become a reality.
The April 24 – 25 conference sought to address challenges facing the region’s quest for affordable housing for its citizens and possible remedies, among other agenda.
This year’s summit theme was Paving Forward, Where to Next for East Africa’s Real Estate Market? The summit was held against the backdrop of a report released at the forum by HassConsult that indicates land prices at county levels are skyrocketing as ‘follow the roads’ investors opt to invest in areas with access made possible by infrastructure development.
Available data also shows that associated-costs of bringing up an average house have increased dramatically in Nairobi since 2010, ten-fold jump from Sh400,000 to Sh4 million.
Yet mortgage uptake remains low with only 25,000 mortgage-purchased homes in total. During the summit, property developers had a chance to renew campaigns on affordable housing projects presently being championed by the government, a key topic for industry stakeholders.
The man behind the forum, Kfir Rusin remains optimistic the aim of building one million affordable homes in five years, if successful, could ignite a lagging real estate sector. “There is opportunity here for Public-Private Partnerships (PPPs),” said Rusin, Managing Director API Events, organisers of the summit.
The need to develop bulk infrastructure has been a principle driver for developers focusing on high-end consumers to deliver an estimated 35,000 homes per year. So far, the lower- and middle-ends of the market remain undeserved. Before the summit, some stakeholders had raised doubts on the success of the initiative if the private sector is not engaged.
The summit’s organisers were, however, optimistic that by bringing in private and public-sector stakeholders, a road map could be developed to make affordable housing a reality. Recent moves by the government to introduce tax incentives, providing land and investing a considerable portion of GDP into industrial construction plants to reduce capital expenditure by developers are some of the ways affordable housing could be achieved.
HassConstult unveiled the new Hass County Land Prices Report as EAPI launched two days of intensive sessions on the regional real estate industry’s most pressing challenges and greatest opportunities. The report said county land prices had risen by an average 7.37 per cent in 2017, compared to a 12.07 per cent rise in 2016, suffering a general slowdown on election uncertainty and the interest rate cap.
However, the county survey delivered evidence of on-going market strength, as well as underlying patterns pushing land prices in sometimes-opposite directions. “Countrywide, infrastructure development continued to drive strong price growth,” said HassConsult Head of Development Consulting Sakina Hassanali. “For many investors, the magical key still remains ‘follow-the-roads’.”
Local economic growth also continued to drive land prices upwards. “We see clearly from price growth of 12 to 14 per cent in Nakuru and Kisumu last year that areas enjoying an influx of business and finance, and underpinned by robust agricultural economies, were only slowed marginally by the elections and rate cap,” said Rusin.
The county land report, which covers 10 counties and 75 towns across Kenya, also analysed towns and suburbs recording the greatest growth in land prices and those that suffered falling land prices, finding evidence of pricing cycles playing out within multiple counties.
“From the more than 20 per cent surge in land prices in Utange (Mombasa), which delivered the strongest growth of the year on an influx of elite residents vacating Nyali (Mombasa), to a similar movement to Ngata by residents from Nakuru, the data showed shifts to new residential beacons, as intensive development began to take the shine off former hot spots,” said Hassanali.
“Likewise, in tracking the surge in prices in Embakasi, and to a lesser extent Donholm (both in Nairobi), we see the first signs of gentrification of inner city areas as congestion and commuter lifestyles elevate the attraction of these areas’ proximity to residents,” she added. Rusin said East Africa was now running a full cycle from initial generation of new conurbations to the regeneration of older centres.
“This survey shows a clear picture of early waves of development driven by advantages of accessibility, location, local activity, and resources such as strong water supply. As development intensifies, many towns experience waves of buyer flight before a new type of influx,” he said.