Certain sections of Kenya’s real estate sector have been experiencing less demand as many developers neglect the country’s low-middle income consumers.
New data shows that segments such as retail, larger, mid-level apartments have posted slow returns and subdued demand in recent months.
Meanwhile, industry experts have raised concerns over the country’s housing market as more developers opt to focus on Kenya’s high-end market.
In January of this year, the Kenya National Bureau of Statistics (KNBS) noted that the country’s real estate sector recorded its slowest quarterly growth in four years.
This helped confirm recent property market reports that have signaled a slump in demand despite increased supply of new housing units.
Data from the third quarter ended September 2018 indicates that real estate recorded a growth of 5.8%, the slowest since the 5.4% registered in the fourth quarter of 2014.
Prior to that, Kenya’s Vision 2030 strategy had an initial target of providing 200,000 housing units annually for all income levels by 2012. It later emerged that only 3,000 units were provided between 2009 and 2012. The government now reportedly hopes to rectify the crisis with its ambitious and controversial affordable housing project. The drive seeks to increase taxes of employed workers in order to raise funds for the initiative.
This is happening at a time when locally-based developers are fighting for a piece of Kenya’s limited high end, wealthy consumers.
On the other hand, John Zeyun Yang, Managing Director of developer and construction company, Erdemann Property said in an earlier statement that there are big opportunities for both Government and private sector firms to invest in housing for the low-end market segment. He noted that this segment had been forgotten by the real estate industry.
According to Sakina Hassanali, Head of Development, Consulting and Research at real estate agency, Hass Consult, some developers have a somewhat myopic view of the industry.
“There was a time when organising the building of almost any property would deliver sales and rentals and high returns. But that time is past,” she said.
Hassanali was speaking at the launch of the group’s recently-announcd Riverside Square development in Nairobi this past week.
She noted that demand is far more subdued in real estate.
“Sales are not so fast. We have areas, such as retail, or larger, mid-level apartments, where vacancies have persisted, albeit that the last, large round of buildings are now filling up,” Hassanali explained.
“Against this backdrop, we at Hass Consult have been pointing ever more insistently to the greater need to identify market demand, to innovate, and to build what consumers want. Today, success in real estate requires far more than four walls and a roof, it requires clear sight of the end buyer, the future residents and tenants, of what they need, and of what they are struggling to find. With that end-consumer in sight, real estate is a success story, and will probably always be a success story,” she continued.
Hassanali argues that real estate is not one, big, globulous mass, where buying is high or low. She says that it is millions of individuals, different types of people, of different wealth, different interests, and different needs looking for different things.
“Build what people want but have not been able to find – and it sells, which is a reality in the real estate industry that we wanted to show in practice, as we keep delivering our reports of projects we have been the development managers for that are now fully sold and sold out,” she stated.
Throughout the currently subdued period in our industry, 95% of developments that Hass Consult manages are sold out before they are completed. This, says Hassanali, is because they are built to meet unmet market demand.