Looking back at year ending today

By Ferdinand Mwongela

Today we wind up what can only be described as an eventful year for the country and the most active for the real estate sector. New products and ideas coming up everyday, as competition grows, have transformed this lucrative sub-sector. Although stakeholders predicted an upbeat year, no one could certainly tell what 2009 held, given the aftershocks of the post-election violence last year.

At the beginning of the year, the real estate market around the world, and particularly in the West, was on its knees as the economic crisis brought economies to a near standstill. The fear at the time was that this would bring about a whiplash effect that would affect the vibrant local market. However, the local market came out safely apart from a drop in Diaspora remittances.

Demand driven

This was partly because the local market is still in its infancy and as many analysts pointed out, it was not intricately interlinked with the West and hence the minimal effect.

This must have been the first time that slow embrace of the much-hyped global village yielded positive results. Players also pointed out that as long as there was demand for housing, there was no fear of a stumble.

Isaac Maira, the Marketing Manager for Tysons, a real estate management company, says that the property market is demand driven and the Kenyan populace is far from being adequately housed. According to Maira, this supply deficit will ensure that the sub -sector continues growing. "We are not going to witness a burst anytime soon," he said, adding that this is a tally different market and Kenyans desire to own homes will continue driving the sub-sector.

For Maira, 2010 can only be better with promises of stabilising prices. "Prices will stabilise but they will not go down," he said. He says the prices especially for the high-end market would even out but the middle-income market, where most of the demand lies, will continue increasing.

A property index released this year by local real estate company Hass Consult, showed that the upper and middle class developments were dropping after a four-year surge.

According to the report, the sale of houses slowed down compared to the last two years in what was attributed to reduced spending power arising from the recession rather than an oversupply, which would have seen a sustained drop. This would, therefore, mean that this drop is only temporary and sustained stability can only be achieved through adequate supply of new units to meet the high demand.

Price index

In June, Housing Minister Soita Shitanda told Parliament that urban areas had a shortage of about 150,000 houses annually while the rural areas had an annual shortage of 300,000 units. He went on to say that property prices in the capital had gone up by 100 per cent in four years while other towns had witnessed between a 30 to 50 per cent rise.

According to the Hass Consult price index, the average property price in city suburbs in 2006 was Sh15.7 million but this had risen to Sh20.2 million last year.

Property exhibitions have also grown to be industry leaders, transforming from what used to be a forum for bringing together motley collection of estate agents to top notch marketing and networking forums for all stakeholders from banking institutions to real estate management companies, developers and ‘soil’ merchants. From the two leading exhibitions held in the country each year — Kenya Homes Expo and Property and Home Living Expos — this year saw a record four with the entry of Mombasa and Kisumu expos.

Homes expo

Mombasa Homes Expo was held twice, first in April and the second two weeks ago in what the organisers described as a record-breaking turn out.

Mwenda Thuranira, Myspace CEO and one of the organisers said the expo has grown fast beyond his dreams. "The second expo was even better. When we started we thought it would take time," he said, adding that there has been a lot of interest in the coastal property market from both local and international investors. Mwenda is optimistic that 2010 will be an even better year for the coastal property market and a time for better and "well planned developments".

Other key developments this year saw pensions regulator Retirement Benefits Authority (RBA) allow pension contributors to use up to 60 per cent of their accrued pension benefits to secure a mortgage, making it one of the biggest steps for the industry this year.

Pension mortgage

With assets worth over Sh290 billion in the hands of privately funded pension schemes, this new development means that the mortgages market can access over Sh170 billion from pensioners alone. With this, Laptrust, the Local Authorities pension fund, was the first pension scheme to sign an agreement with Housing Finance to have its members use their pension savings to access mortgages. Housing Finance Managing Director Frank Ireri said this was a perfectly safe venture, assuring contributors that their retirement benefits would not be affected. According to Ireri, the pension savings could be used as a "security against the loan without eroding the retirement benefit".

In the same breath, KCB’s mortgage arm, S&L got into an agreement with UAP Insurance in October to provide an insurance cover for mortgage finance borrowers to cushion them in case of loss of income.

S&L Managing Director Caroline Kariuki explained that this would give a borrower time to get back on his feet without losing his investment. In case of a loss of income, UAP takes over for nine months during which time one is expected to have sorted out their financial problems.

This year has also seen the adopting of the National Land Policy by Parliament as well as significant progress in the preparing of a housing policy, which is expected to regulate housing plans approval and curb the increasing cases of shoddy constructions.

Disasters

Developers have also hailed the year as a good one. Speaking at the opening of Tamarind Meadows, one of the company’s developments, Tamarind Properties Chief Executive Officer Joe Mungai enthused that the year has been good while at the same time brushing aside talks of a bubble that dominated the industry earlier in the year. "There is demand for housing units," said Mungai, pointing out that this is what drives the market.

Starting tomorrow, S&L will be merging with its parent company Kenya Commercial Bank. Ms Kariuki, however, sought to allay any fears that the merger would change the way the company operates, saying that instead this would increase their lending power. "We will retain our brand… we are committed to making sure we have specialised units for mortgages," said Kariuki.

However, it has not been all rosy, as the year also saw disasters like the Nakumatt tragedy in January after a fire broke out in the Nakumatt Downtown outlet, claiming 29 lives and totally destroying the building. Disaster struck again in October in Kiambu when a building under construction collapsed, killing 16.

 

Read all about: Real Estate Morgage

 

 

---