It is an undeniable fact that millennials represented a sizable potential pool of first-time buyers, outnumbering the impressive number of baby boomers of the 1970s and 1980s globally.
Many economists believe that millennials will save the sluggish housing market in 2021. In addition, as technology advances, more buyers expect to see videos of the homes they want to purchase. As a result, virtual tours are a must.
According to the National Association of Realtors, an estimated 50% of buyers used the internet to search for a property, with that figure increasing to 93 percent for people under the age of 36.
Despite the pandemic’s challenges, the real estate industry is optimistic in 2022. With mortgage rates expected to remain below 5%, housing demand is expected to remain strong.
One of the primary causes of Kenya’s housing shortage is an underdeveloped mortgage market. The World Bank recently praised the role of Savings and Credit Cooperatives (Saccos) in providing affordable housing finance in a report.
Foreign homebuyers’ interest in Kenya has recently increased. Property developers believe that investments from Kenyans living in foreign countries will boost the local housing market in 2022.
Kenya launched its first licensed investment fund for citizens living abroad last year, with the hope of channeling more money from the diaspora into development projects across the country.
Kenya’s real estate market is primarily a rental market. Affordability is essential. Access to decent housing is a challenge. As a result, only about 20% of Kenyans living in urban areas own their homes.
With a rapidly growing population and an expanding middle class, the residential sector is currently experiencing the highest demand. In Nairobi, a nice big house can cost $1.1 million in what is still a poor country. However, the rental returns are quite good, ranging from 6% to 7%.
The Kenyan real estate market has historically grown at an exponential rate, as evidenced by its contribution to the country’s GDP, which increased from 10.5 percent in 2000 to 12.6 percent in 2012 and 13.8 percent in 2016.
Westlands, Lavington, Kilimani, and Kileleshwa contribute the most, with an average rental yield of 9 percent for unfurnished units and 15 percent for furnished units.This expansion is being driven by;
Infrastructural developments such as improved road network, including the Nairobi Expressway, utility connections, and the upgrade of key airports;
Stable GDP growth of 5.4 percent over the last five years, compared to a Sub-Saharan average of 4.1 percent;
Demographic trends such as rapid urbanization of 4.4 percent per year, compared to the world’s 2.5 percent.
and population growth of 2.6 percent per year.
High total returns of 25.0 percent on average, compared to 12.4 percent in traditional asset classes.
From 2010 to 2015, the real estate market in Kenya was dominated by three and four bedrooms, according to the Kenya National Bureau of Statistics. However, as of 2019, demand for larger units has decreased in comparison to studios, one and two bedrooms.
According to the above study, the average rental yield for unfurnished units is 9% and for furnished units is 14%.This is due to the fact that the developments are distinguished by their abundance of amenities.
Kenzi by Saif Real Estate, for example, has a fully equipped modern gym, steam and sauna, solar heated swimming pool, and concierge services. The interior finishes are also of high quality.
Nairobi’s status as an important business hub in East Africa has resulted in an increase in the supply and demand for serviced apartments in Westlands, Lavington Kilimani, and Kileleshwa.
Serviced apartments are becoming more appealing to investors as a result of;
Cost effectiveness – Unlike hotels, serviced apartments have lower overheads, making them less expensive to run.
High Returns – The combination of long and short-term rentals increases the overall monthly income. When demand for the unit drops, it is easily convertible – to either furnished or unfurnished apartments.
Global corporations seeking to establish regional hubs in Nairobi are increasing – International firms such as Google, PriceWaterhouseCoopers, Microsoft, KPMG, Cisco Systems, and UN Habitat have established offices in Westlands.
Because of the area’s current status, developers have noticed a gap in demand for housing created by multinational corporation employees, UN employees, expatriates, and other foreigners who prefer serviced apartments to hotels because they are more affordable and cost effective, have more space and amenities, and provide a “home away from home” feeling.
Foreigners are permitted to own property in Kenya in their own names. Subject to certain limitations, the Constitution (2010), the Lands Act (6/2012), and the Land Registration Act (3/2012) grant the right to any person, either individually or in association with others, to acquire and own land in Kenya. This is significant because many foreign investors have been duped into believing they cannot own land in their own name.
The favorable business environment and a diligent workforce are enticing not only foreign but also domestic investors to invest in developing properties in internationally renowned holiday destinations such as Masai Mara National Reserve, Naivasha, Nanyuki, the coast, and Nairobi in order to capitalize on the opportunities the country has to offer. This is the essence of real estate tourism.
As a result, data shows that a house in the city now costs 3.1 percent more on average, up from 0.20 percent last year and 3.5 percent in 2019.
This is the fastest growth rate since 2018, when it was 8.5 percent, reflecting the property market’s recovery from the Covid-19 economic hardships.
According to Article 65(1) of the Constitution, a “person who is not a citizen may hold land on the basis of leasehold tenure only, and any such lease, however granted, shall not exceed ninety-nine years.” However, when the leasehold term expires, a renewal of the lease may be sought.
In conclusion, with continued interest in the Kenyan property market from both local and international players, continued investment in infrastructure, and improvements to the legal environment, the Kenyan real estate sector is undoubtedly poised for long-term growth.