Opportunities abound for investors in this election year

Despite doomsday predictions that the real estate market would slow down this election year, new constructions continue to come up, presenting opportunities for investors, writes HAROLD AYODOProperty developers have shifted to top gear in construction of residential houses despite perceptions of uncertainty ahead of the General Elections.At the beginning of the year, economists predicted a slowing down of real estate because of the upcoming polls and runaway mortgage interest rates, saying many buyers would adopt a wait and see attitude before investing.However, judging from the many constructions in residential estates in Nairobi and other towns, it is obvious that developers and prospective homebuyers have turned a deaf ear to predictions.Developers say an election year is the best time to buy and sell property and the prospect of devolution to the counties starting next year may also be the reason for the continued vibrancy in the market.Interest ratesVilla Care Chief Executive Officer Daniel Ojijo brushes off perceptions of uncertainty, saying demand increased even after the post election violence in 2008.Prof Walter Jaoko, Managing Director Jadali Properties"Buyers are better off buying property today than tomorrow because prices will continue to rise," says Ojijo.According to Ojijo, the asking prices of homes may rise higher after the elections."Buyers often have personal influences in making choices and will purchase at the end of the day ¡ª if they want," he says.Ojijo says demand for their rental houses and those for sale increased in 2007 and 2008 despite increased prices of land in most areas in the capital."Experience shows that people who have planned to buy houses will buy and we are yet to hear of reduction in property prices during election years," Ojijo says.However, Ojijo admits that the property market has slowed down due to the high interest rates."We are optimistic that the recent reduction in fuel prices will also see interest rates go down and eventually construction costs," Ojijo says.He says although interest rates have gone up from about 14 per cent to 24 per cent, housing is still a basic need and people will continue investing in it. A tour of Kajulu Gardens in Kisumu and Mamboleo along the Kisumu-Kakamega Road is testimony that demand for housing remains high despite fears of uncertainty this year.Jadali Properties, who are developers of 16 maisonettes within a gated community in Kisumu, say the market is overwhelmingly receptive and that six of their houses have already been bought."Approximately 70 per cent is complete. The demand is encouraging despite fears of uncertainty due to the looming polls," says Jadali Properties Managing Director Prof Walter Jaoko.Jaoko says many Kenyans, including those in the Diaspora, have been enquiring about the houses even though we haven¡¯t advertised. Ounga Commercial Agencies Director Eric Ounga and Operations Director Victor Oluoch say Kisumu has witnessed demand in property in election years.Luxury homes"Our records show increased purchases in 1997, 2002, 2007 and enquiries this year is proof that things will not change," Ounga says.Oluoch says property prices are also expected to go up with the increasing demand.According to the recent Knight Frank Global Rental Index report, rents of luxury homes in the capital city rose by 13 per cent for the first nine months of last year.The increments made Nairobi the second city in the world, after Geneva (Switzerland), which recorded 18.3 per cent rent increase in 2011.According to the latest Hass Consult report, middle-income estates like South B, South C, Nairobi West, Donholm and Buru Buru are among those with highest increases in selling price and rent."Major rises in average prices over the past 15 months were recorded in South B Tena, Fedha, Nairobi West and Nyayo," said Farhana Hassanali, the firm¡¯s marketing manager.Consequently, analysts predict that property prices in Nairobi will be steeper this year.On the flipside, prospective buyers of homes in the high-income bracket expect a rosier investment should prices continue to go down as indicated by the report.According to the study, prices of stand-alone houses fell by 1.8 per cent between September and December last year.Currently, there is less buyer appetite for both villas and stand-alone homes as apartment prices rose by 1.4 per cent between October and December last year.Since a few people can afford to buy property in high-end areas, private developers in Westlands, Brookside, Runda and Muthaiga in Nairobi may have to exercise patience.Affordable housingFor low-income earners, house ownership would remain a mirage as the Government struggles to construct such houses.Housing Finance Managing Director Frank Ireri says the Government should collaborate with the private sector to realise the dream of low-cost home ownership.The National Housing Corporation (NHC) tasked with provision of affordable housing appears to have limited capacity.According to the Economic Survey of 2011, NHC increased the number of completed units from 341 in 2009 to 390 in 210.And the actual expenditure on housing dropped drastically from Sh3.3 billion in 2009 to Sh656 million in 2010.For private developers, it is expected that the investment by the Government in road construction, electricity expansion and water projects would stimulate growth. However, a number of factors such as increase in the cost of construction materials and land in urban areas will continue to drive up property prices.The fact that the Government halted transactions on leased property until formation of the National Land Commission will also affect the industry¡¯s growth this year.¡¡

Opportunities abound for investors in this election year

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