By FRANCIS AYIEKO email@example.com
Posted Thursday, January 14 2013
Both Kenyans in the diaspora and wealthy locals are driving growth in the country’s property market.
According to the newly-released 2012 Housing Yearbook, Kenya had “an astonishing property year” in 2012 with the best performing prime residential market on the planet.
Apparently quoting the findings of an earlier report by Knight Frank, the new report says that values in Nairobi grew by 25 per cent in 2011, while the coastal cities of Mombasa, Malindi and Lamu all grew by 20 per cent, reflecting persistent demand for high-end property, as well as opportunities for growth off of a low base.
“Kenyan investors in the diaspora are a key source of this demand, as are wealthy, local Kenyans,” it says, adding that the average price for an apartment is Sh11.7 million, up from Sh5.2 million in December 2000.
The report says that indicators within the construction industry likewise point to a construction boom.
In Nairobi, the council approved Sh19 billion worth of buildings for the first three months of 2009, up from Sh12 billion in 2008.
Cement consumption increased by 16.2 per cent in 2008/2009 from the previous period.
On the other hand, low-end real estate housing has posted a market value increase of 200 per cent since 1998, and has gained the reputation of providing fantastic profits.
Kenyans abroad have also contributed to the boom and are responsible for almost 35 per cent of the mortgage loan volume as non-owner occupied borrowers.
Suppliers of housing finance across the board have recorded healthy profits over the past couple of years because of this growth in the property market, it adds.
A major challenge to this growth, however, is access to land which has always been an issue in Kenya.
The report cites an incident where in September 2012, slum dwellers associations in the country sued to claim rights to land that their members had occupied for years.
In the case, umbrella group Muungano Wa Wanavijiji submitted that landowners had flouted conditions attached to their title deeds, holding the land rather than developing it within the stipulated period, and that in this regard their legal claim was contestable.
The lawyer representing the slum dwellers argued that the plots should therefore revert to the government.
(According to the UN-Habitat, 57 per cent of structures in slums globally are owned by Cabinet ministers, civil servants, government officials or politically connected businessmen, who are the main beneficiaries of the continued existence of slums.)
“Slum dwellers in Nairobi have sought and in some instances succeeded in buying the land they occupied,” says the report, noting that 10 per cent of slums are located on uncontested public land, 40 per cent on riparian and utility reserves, and the remaining 50 per cent on private land that was previously public property.
On policy and regulation matters, the report says that the adoption of a national land policy in 2009 was a positive step in resolving the protracted question of the reliability, accuracy and legitimacy of the land administration system in the country.
It also cites the lowering of stamp duty on property purchases to four per cent, which it says was meant to create greater affordability.
Furthermore, it takes note of exemption from value added tax for developments of more than 20 low-cost units, a development it says was aimed at encouraging greater housing supply.
Other developments the report notes include the coming into force of the National Land Commission and amendments to the Banking Act that have allowed mortgage finance companies to operate current accounts as a way of attracting low cost consumer deposits to expand their lending capacity. (Housing Finance launched its current account in March 2012 as a result of this intervention).
However, the report rightly notes that Kenya’s rapid urbanisation, demographics, and the under-supply of housing point to a consistent need for middle and low-cost housing segment where demand is highest and supply least.