Property boom at the coast

The booming property sub-sector continues to push up house prices at the Coast with more investors putting up residential units and apartments that are now being turned into holiday homes, writes ALLAN OLINGO

The cost of land and residential property in prime sections of Mombasa has almost doubled in the past three years. Recently, Housing Finance (HF) opened another branch in Mombasa as it sought to tap into its growth, now ranked as one of the most attractive investments destination globally.

According to Housing Finance’s Managing Director Frank Ireri, the coastal property market has emerged as the second most attractive after Nairobi, with a huge potential for growth.

“The coastal property market is very vibrant and we believe that this new branch will attract mortgage borrowers and property developers thereby growing our loan book,” said Ireri during the opening of the Mombasa branch.

The emergence of the Coast region as a secondary homes market, the pressure in the property segment in Nairobi coupled with the rise in the investment in holiday homes as an alternative to the traditional hotels, has seen a steady rise in housing demand, a factor that has led to a rise in property value.

In the upmarket Nyali suburb, for example, the value of land has almost doubled in the past three years with half an acre going for Sh40 million up from Sh20 million. The rental asking prices within the same neighbourhood has also skyrocketed averaging now at an all time high of Sh100,000.

According to Bob Omondi, a marketing consultant with Sunrise Apartments in Shanzu, apartments are popular with young professionals, especially from Nairobi and those in the diaspora seeking to own property in the region.

Investment sense

“We have noticed that apartments are the best way for people to own property in Mombasa. We encourage them to buy these apartments as holiday homes because the returns are very handsome as compared to buying them for their own use,” says Bob.

According to Bob, most buyers take up these properties on mortgage and, therefore, it makes investment sense to use their apartments as holiday homes that can earn them up to Sh25,000 a night in the peak season.

In April, real estate firm Knight Frank estimated that property values rose by an average of 20 per cent last year in the major urban centres of Mombasa, Watamu and Malindi.

The hike was only lower than Nairobi, where prices rose by 25 per cent in prime real estate, according to Knight Frank, placing the two markets as among the leading in Africa.

According to Myspace Properties Chief Executive Officer Mwenda Thuranira, most developers are rushing to gain from the housing demand and high profit margins, presenting lending opportunities for development financiers.

“North of Mombasa is the new frontier in property development, which promises stiff competition to established estates,” says Mwenda, who is also the chairman of the Kenya Property Developers Association, Coast Chapter, and the Mombasa Homes Expo organiser.

Mwenda says people have realised the value of owning property at the Coast because of the tourism package.

Land prices have almost quadrupled, with an acre going for up to Sh1 million, up from an average of Sh300,000 four years ago.

“We have witnessed a surge in land prices due to pressure from Nairobi investors and foreign clients, which has made land that initially was fetching less than a million seven years ago, to fetch close to Sh8 million now,” says Mwenda.

Apartments are not only thriving in Mombasa. Mtwapa, Vipingo, South Coast, Ukunda and Diani are also benefitting from increased real estate activity.

Land prices

During the Mombasa Homes Expo held last week, Home and Away established that on average, depending on the location of the plot, a quarter of an acre sells for about Sh4 million, up from Sh1 million three years ago, while a 50 by 100 feet plot goes for about Sh2.5 million, up from Sh1 million.

Marketing executives from various real estate firms attest to the fact that rental yields in the region are slowly rising. Since 2010, rents have risen by more than 35 per cent.  In areas like Mtwapa and Shanzu, prices range between Sh12,000 and Sh15,000 for a one-bedroom house and Sh20,000 to Sh25,000 for two bedroom houses within a gated community.

“The beach front areas in Mombasa and its environs are already sold out and if one is lucky to find an available one, then the asking price is pretty expensive,” said a marketing executive from Euro Trust, a real estate agency.

According to Mwenda, with the increased appetite for Coast’s real estate market, also comes poor and unplanned neighbourhoods, something he says will make Mombasa lose its aesthetic look.

“Real estate developers should now be cautious and only put up structures that are well planned and designed. The local authority should always check on unplanned developments and provide amenities so as to make Mombasa attractive to would be developers and investors,” he says.

“We have seen what lack of planning can do to a town and we believe Mombasa will be different because it is growing to be both the home of business and relaxation with the best of Kenya’s hospitality service that the real estate market can tap into,” says Mwenda.

Donald Shipenzi, the general manager at Eden Beach Apartments, says most beachfront properties are holiday homes

“In our development, which is almost on the beach, most of the houses are already sold and only a few units are remaining. With an average monthly income of around Sh200,000, these becomes very appealing investments,” says Donald.