Slow down in Kenyan property Market? Not for long!

The Kenyan real estate sector revolves around several types of properties. These include commercial, residential, industrial, office, agricultural and other special types of properties found majorly in the urban areas. Real estate in Kenya has experienced a boom that arose and grew rapidly from around the year 2000. Since then, it has been one of the best investment vehicles every Kenyan could think of. For instance, Kenya’s real estate experienced a growth of 5.6%, 6.2% and 6.1% during the financial years 2014, 2015 and 2016 respectively.

However, the narrative is slowly changing since 2017 up to date with political instability, fraud, buyer exploitation, inflation and credit access among others being the major causes of this recess. This has left many Kenyans in awe after losing their savings and sellers with an oversupply of properties with no one to sell to. 

In the early 2000s’, the property market in Kenya started to increase rapidly which saw the prices of properties in most urban areas double or triple within a span of fewer than five years. This boom was a result of several factors. The population in the country was and has been growing rapidly over the years. This created demand for land since it was getting scarce as people continued to multiply. Kenya currently constructs around 50,000 houses annually against a demand of more than 200,000 units. This has shifted the demand from ready houses to far cheaper land in which buyers can construct their own designs at their own pace. The growth of middle-class persons has been upwards since the late 90s. This meant that quite a number of Kenyans had a surplus and therefore could afford to purchase properties in urban areas.

Most Kenyans started moving from rural to urban areas in search of education and employment opportunities. This urbanization intensified towards the new millennium because, at this point, the majority of them were literate as compared to previous years. This, combined with improved infrastructure, improved road networks, more basic utility connections, and enhanced communication created more demand for properties especially in these urban areas. Political stability and access to mortgages are other factors that motivated the demand for properties in Kenya during this period. These factors developed unique trends with investors seeking to mint maximum profits while buyers sought improved lifestyles and quality products. This has been the trend in the last two decades until two years ago when the demand started slowing down owing to a number of factors.

In the year 2017, Kenya held general elections that were disputed by the opposition which was followed by the nullification of the presidential election by the Supreme Court ten days later. This caused panic to potential property investors considering the losses many Kenyans suffered during 2007 post-election violence. The economy also stagnated during this period because of the associated uncertainties. This has been vehemently felt in Kenya’s real estate sector. The Central Bank of Kenya introduced an interest rate capping that came into effect in 2016 to improve credit uptake. However, this backfired since the banks made it even harder for individuals to access loans.

Despite the swift growth of real estate, getting a genuine property with a clean title has to date been a major challenge facing most buyers in Kenya. There are so many tales of Kenyans who heavily invested in real estate only to watch as their properties are brought down by bulldozers in broad daylight. This has left buyers with no option but to look for alternative investments such as stocks. The country has been going through hard economic times with little money in circulation because of the many infrastructural developments ongoing under the current regime. This leaves the low-income earners with no surplus to invest or save.

In the last few months of 2019, it’s evident that real estate growth and demand is resuming at a slow pace especially since the government recalled the old 1000 notes from circulation. Political stability is back to normal especially since the handshake between the two presidential aspirants of 2017 which helped cool down the political temperatures which were harming the real estate sector even before the election was held. The population is still growing rapidly and people are still moving to urban areas in search of better opportunities. The housing gap is widening as a result of urbanization and the uptake of credit is slowly getting back on track. The Kenyan government is investing heavily in infrastructure, institutions to fight fraud and lawlessness in the sector, and also putting measures to ensure political stability henceforth. It is therefore certain that Kenya’s real estate sector will soon pick up and maybe surpass previous numbers.