Are developers ignoring housing needs of young adults?

Kenya: A tour of the counties reveals that most new housing developments are three-bedroom and four-bedroom houses, built with the family unit in mind. 

In a country where 80 per cent are under 35 years, where will young adults, who have just started working and require smaller apartments, live? Where will the increasing student population from universities and colleges find housing?

According to James Kaniaru, CEO of Alliance Capital Partners (ACP), a real estate investment firm, market research shows that the reason developers in Kenya have been designing houses targeting families is that they are more financially stable and are the majority of home buyers.

“Families usually have dual salaries, and are often better loan repayers as they would not want to lose their home. However, despite demographic statistics indicating that the median age in Kenya is 19 years, developers are busy building larger houses yet ignoring the bulk of the population - young adults - who need decent houses once they start living on their own,” says Kaniaru.

The Kenya’s Youth Employment Challenge Report, a report by UNDP in 2013, states: “Young people aged between 18 and 34-years-old constitute more than a third of the entire population while nearly 80 per cent of Kenyans are less than 35 years, which represents great economic and social opportunities as well as enormous challenges.”

With a fast growing urban population, the UN estimates that 40 per cent of Kenya’s population will be living in cities and towns by 2040.

According to Samuel Owuor, a geography lecturer at the University of Nairobi, currently, provision of services (and in particular housing) is not in tandem with population growth.

The Knight Frank 2014 Second Quarter Report indicates that developers in the Nairobi prime apartment market are shifting their focus from three and four bedroom apartment to smaller units such as studios, one and two bedroom apartments.

ACP has for the last few years been investing in studio apartments which are self-contained living spaces often used by a single person or a couple. (In the UK they are called bedsitters and as the name suggests, there is space for a bed and a seat). 

 Studio Apartments

“The target for the studios is the unattached young professional who usually has high disposable income, is probably pursuing a second degree and has a side-hustle. This person wants to live close to town, in a good location befitting his aspirations, that is safe and easily accessible by reliable public transport,” says Kaniaru.

He says since 2005, ACP has developed over 1,100 studios in Nairobi, Kisumu and Mombasa.

 

Suraya Properties Ltd also ventured into studios with starter-homes for first-time home buyers. The project, known as Sucasa, is located off Mombasa Road behind Mlolongo, sits on 12 acres and will have 1,000 apartments comprising studios, one, two and three bedroom apartments. 

Other “studio projects” by Suraya are the Lynx’, which target first-time executive home buyers looking for reasonably priced decent, affordable, quality homes in already developed locations and in easily accessible areas, hence the Lynx Mbagathi, Royal, West and  Imara.

Director Sue Muraya, believes that the quality of housing affects a person’s quality of life: “We designed high standard studios which is what we believed Kenyans deserve and desire. Most Kenyan housing options lack basic necessities, have poor finishes such as crooked tiles and no playgrounds so the children end up playing on the road.”

Muraya believes that the reason that most developers have not tapped into this market is that their plans may have been rejected for approval.

 Approval

“When starting out, it was difficult at first to convince City Hall to approve the plans as they said that smaller-sized bedsitters at 15 square metres was too small. Yet in comparison, most servant quarters which are sub-let to spinsters and bachelors are the same size, some with the inconvenience of having the toilet and kitchennettes outside the house, plus sharing of gates with the owner of the main house. What we were proposing was a quality affordable home with an in-built kitchen, a sitting area, a bed area and large well finished windows,” she says.

Developed in a gated community, the owner enjoys additional amenities such as a private clubhouse, swimming pool, jogging tracks, cabro driveways, street lighting, borehole water, back-up generators and schools. There is also a lounge and a laundry area so that the quality of life is enhanced.

Regarding the appropriate design for studios, Kaniaru says: “When developing studios, it is better to use a simple layout that is efficient and does not feel cramped.”

ACP has developed 74 furnished and serviced studios - Mvuli Suites - in Nairobi on Kipande Road near Museum Hill and 70 units in Kisumu, which are owned by individuals and professionally managed. 

“We use floor to ceiling windows to maximise natural lighting, which enhances quality and ambience of the space. Cabinets and wardrobes have a dual role of providing storage and demarcating the space to ensure that it holds coherently. For small living spaces, we include storage spaces in the bathrooms and living area to keep the space tidy,” he says.

When building Sucasa and Lynx, Suraya Properties were targeting young professionals who have worked for six months to one year and have stable contracts with payslips.

“With a salary of between sh35,000 and sh150,000, these young adults can create wealth for themselves as they purchase their first homes and begin to climb the property ladder. We also realised that based on our clients’ salaries, banks were approving loans of about Sh2 and Sh3 million but there were no houses available in the market that were priced below Sh5 million. The studios filled that gap as they could be purchased with the approved loans,” says Muraya.

 Attractive option

From an investor’s perspective, studios are a more attractive investment option.

“A 150 square metre house in Ngumo renting at Sh60,000 has a yield of Sh400 per square metre against Sh1,000 per square metre for a 12 square metre studio in South B which rents at Sh12,000 per month. Though the turnover may be higher than that of family homes (younger people are more mobile than families), vacancy losses are lower because studio units don’t stay vacant for long,” says Kaniaru.

With an upsurge in the number of universities, student housing is another under-served market. ACP has ventured into this market and is looking to develop two projects providing a total of 260 studios and flats on two sites near the central business district. 

These student apartments will be equipped with common social areas such as recreation lounges, mini libraries and a study lounge on every alternate floor. The top of the buildings will have a flat roof, providing space for outdoor entertainment. On the lower floors, there will be commercial facilities that enhance student life.

Another upcoming student housing project will be located on Lower Kabete Road and will have a capacity for 1,500 students in 500 studios and flats.

Sue Muraya encourages people to aspire to own homes and studios as they start climbing the property ladder.

“You will never own a house if you are engulfed in fear, so begin saving for a home as you discuss with financiers so that you know and meet their requirements. Buying a plot and letting it appreciate before resale is a great way to get a deposit for your starter home. Just do not sit and do nothing,” she says.