Real estate still best bet despite election threat

National Housing Corporation Madaraka. PHOTO: WILBERFORCE OKWIRI

Development of infrastructure, friendly Government policies and poor performance in other industries are set to cushion the real estate sector despite election jitters.

Investment firm Cytonn said in its 2017 Land Research Report released yesterday land prices were also likely to hold and even grow heading into the August polls.

“We expect land price increase to be largely stable, with sustainable increments. Prices may stagnate in some pockets of the market, especially those which experienced violence in previous electioneering periods,” said Cytonn.

The firm, with significant investment in real estate, increased allocation of funds for development and rehabilitation of access ways, the launch of new projects like the Standard Gauge Railway (SGR) as well as issuance of title deeds and streamlining of the Lands Registry would prop up land prices.

Other Government initiatives such as digitisation of the Lands ministry, waiving of the National Construction Authority and National Environment Management Authority fees as well as title search fees plus a 15 per cent tax cut for large-scale developers had created a conducive investment climate for real estate investment.

The incentives, the report said, had also lowered construction costs.

HIGHEST RETURNS

Cytonn sees social spending towards elections having a neutral effect while low credit and reduced market activity are likely to slow down the sector.

 “From the above factors, most point towards an increase in land pricing - one towards having a neutral effect and one towards price stagnation. As such, in our opinion, the year 2017 will see the land real estate market remain largely stable and witness sustainable price increments,” said the firm.

Poor returns in the capital market as compared with the real estate sector, the firm said, could see investors go for land to protect their earnings this year. The firm found out that land in the Nairobi Metropolis recorded the highest returns at 19.4 per cent in comparison to other investment asset classes.

Cytonn also said the returns on land were way above the 11.7 per cent inflation rate, cushioning investors from erosion of their gains.

“Real estate is providing inflation hedge, with land being the capital asset necessary for development,” said the firm in the report.

The research was conducted in 18 suburbs and 11 satellite towns in the Nairobi Metropolitan area.