Detached houses still best bet for developers

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Despite falling demand, standalone houses still make business sense for property developers.

According to a report by Cytonn Real Estate, the detached housing segment can still offer good returns to longsighted investors.

The new report by the development affiliate of Cytonn Investments said the performance of the residential real estate sector in the third quarter of the year has remained flat owing to among other challenges, crippling delays in the processing of construction permits, oversupply, and slow private sector credit growth.

“... we expect appetite for the rental market to continue growing, especially in the high-end and upper mid-end markets. In addition, we expect the residential lower mid-end markets to pick up on uptake as more investors shift focus to affordable housing,” said Cytonn Research Analyst Wacu Mbugua. The report shows that detached houses still outperform apartments on occupancy and rental yields, with exclusive houses in Ruiru topping the ranking at 80.4 per cent in occupancy and 6.10 per cent in rental yields.

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Apartments in Donholm and Komarock follow closely at 89.9 per cent in occupancy 5.80 in rental yields. The trend comes in the face of recent declining showing for detached houses.

For instance, a report by Hass Consult in April this year showed that while eight years ago, detached houses led the market, the trend had shifted in favour of apartments and semi-detached houses.

The report had shown that in 2001, apartments took up 23.5 per cent of the market as semi-detached took up 24.5 per cent while detached houses took up 52 per cent.

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However, in December 2018, the Hass Index showed apartments took up 55.6 per cent of the market. Semi-detached houses took up 29.2 per cent while detached houses took up 15.2 per cent.

HassConsult Head of Development Consulting and Research Sakina Hassanali said construction has over the last 30 years been dominated by the building of large homes on individual plots.

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“However, Kenya may also now start to see a new trend in the more widespread conversion of large detached houses into multiple residences,” she said.  

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Real estateCytonn InvestmentsHassConsultSakina HassanaliCytonn Real Estate