Homing in on home ownership
June 25, 2019
The advent of COVID-19 and the public emergency that ensued in 2020 impacted heavily on the economic activity in Kenya along with the rest of the globe. This was exacerbated by the resultant lockdowns and restriction of movement introduced by governments in a bid to contain the spread of COVID-19. As a result, many economic sectors bore the brunt of the pandemic and the real estate industry was no exception.
According to the Kenya National Bureau of Statistics, the real estate sector in 2020 recorded moderate growth with a general decline in transactions attributed to the tough economic environment in the wake of the COVID-19 pandemic that had adverse effects on the sector. NCC approval decreased by 60%, projecting a reduction in supply over the next two years. Projects continue to sell but at a lower sales velocity. Pricing has stabilized, with the exception of distress projects. There is still strong underlying demand for good quality homes.
One of the subtle lessons the pandemic has revealed to the real estate sector is the fact that the buying habits of the well to do in society have shifted. According to a recent wealth report by Knight Frank released in February 2021, a good number of Kenyans are seeking second or new homes away from what was traditionally considered normal Kenyan neighborhoods in search of more privacy, outdoor space, or areas they can acquire at lower prices. This has created a new demand for homes, a gap that did not exist before and a good opportunity for real estate investors.
The fact that the second side of the pandemic coin indicates that opportunities still exist in the real estate industry is the best sign that this is the time to invest. Going forward, there can only be a neutral to positive outlook for the real estate industry in 2021, especially following the global roll-out of the vaccine which raises hope for the containment of COVID-19.
Despite naysayers’ sentiments, you can bet your last shilling that investing in real estate is making hay while the sun shines, more so in these tough economic times chanced upon us by the pandemic and the uncertainties that come with a looming general election.
A market intelligence report on Middle-Income Housing by Sagachi Research projects revealed that the total demand for Middle-Income Housing in Nairobi will grow at a 5.4 percent compound annual growth rate to reach 13,000 units by 2024 from an estimate of 10,100 units in 2019. This is encouraging for the sector.
Despite the fact that most businesses may be restructuring and downsizing their operations to survive another year of uncertainty prior to the 2022 general elections in Kenya, thus affecting uptake, investors should look at the forest and not just zero in on the tree by considering the long-term prospects that will definitely outlive the current slowdown.
Leaders in the real estate market will be defined by what they do in the medium term to manage crisis, respond, recover, and thrive with respect to successfully navigating current market trends. Despite the uncertainties brought about by the pandemic and the looming general elections, the efficacy of investing in real estate can only be slowed but never stopped. Investments in real estate are long-term ventures and in the long run, things can only get better for those who did not hesitate to start this early.