Millennials represented a large potential pool of first-time homebuyers, surpassing the impressive number of baby boomers of the 1970s and 1980s. Many economists believe that millennials offer salvation for a slowing home market in 2021. Also, as part of growing technology use, buyers expect to see videos of the homes they want to buy. Thus, virtual tours are a necessity. The National Association of Realtors found that an estimated 50 percent of buyers used the internet to search for a property, with that number increasing to 93 percent for people under 36 years old. The real estate industry is filled with optimism in 2021 despite the challenges of the pandemic. With mortgage rates predicted to remain lower than 5%, the demand for housing is expected to continue.
Kenya’s undeveloped mortgage market is one of the primary reasons for its housing shortage. In a recent report, the World Bank commended the role of Savings and Credit Cooperatives (Saccos) in providing affordable housing finance. Kenya has witnessed an increasing interest from foreign homebuyers recently. Property developers are positive that investments from Kenyans living abroad will boost the local housing market in 2021. Kenya introduced its first licensed investment fund for citizens living overseas, last year. This move is expected to channel more of the diaspora’s money into development projects across the country.
- Residential Property: The housing market in Kenya is primarily a rental market. Affordability is a key challenge to accessing decent housing. As a result, only about 20% of Kenyans living in urban areas own the homes they live in. With a rapidly growing population and increasing middle class, the residential sector has recorded the highest demand. A nice big house can cost $1.1 million in what is still a poor country in Nairobi. But the rental returns are rather good at around 6% to 7%.
- Commercial Property: As remote working is increasingly becoming a way of life, property agents in Kenya are expected to rethink their strategies over time as the workplace is evolving to accommodate remote and hybrid workplace options. Developers are increasingly employing green building technology which has been proven to increase employee productivity.
The retail sector has grown tremendously, characterized mainly by a continued rise in mall space concept. This concept has seen Kenya become the second largest in mall space ownership in Africa, after South Africa.
Kenya Affordable Housing Project
With the nationwide housing deficit standing at 200,000 units annually and an accumulated deficit of over 2 million units. The Kenyan government’s affordable housing initiative is viewed as an opportunity for property developers to diversity, The government aims for 500,000 new affordable homes by the end of 2022. However, this initiative is hampered by a lack of funding and court cases.
The Kenya Mortgage Refinancing Company (KMRC) was established with the primary function of providing long-term mortgage loans at low-interest rates. Stamp duty tax exemption for first-time homebuyers and a 15% corporate tax rate relief for developers who provide at least 100 affordable housing units were year were introduced. The National Housing Development Fund (NHDF) was established, which acts as a saving trust for employees who plan to purchase a residential property. On the other hand, the investment opportunity for apartments in satellite towns such as the upper mid-end segment in areas like Kilimani, Gigiri, and Westlands continue to have relatively high returns.
Real estate in Kenya may have been the reserve of the rich, and according to recently published data, it’s also the best performing investment in modern history. Right now, it’s possible to build real wealth through real estate at a fraction of what it used to cost. You just need to understand the trends and property outlook. Nairobi property is attractive, with significant capital gains potential. Though the property market is always changing. We see a positive to neutral outlook for the real estate industry in the rest of 2021, especially following the global roll-out of the vaccine.