While there have been treads towards real estate developments to accommodate young adults –college students- between the ages of 18 and 23, little has been done to maximize the potential of the compact residence spaces to accommodate house essentials or allow space for planning. Most individuals who live in studio apartments and bedsitters are students. According to research by Jumia, there are 280000-bed spaces available in Kenyan colleges and universities compared to the 769000 student population that is expected to rise yearly owing to the expanded enrollment in higher institutions of learning.
Currently, student accommodation accounts for 40 percent of the total housing shortage in Kenya. And while investors may rush to invest in this form of low-cost housing, overlooking interior design architecture and space maximization may not yield consistent returns in the long run as supply catches on with demand, therefore space utilization becomes a vital design consideration as it is a house hunting element. As such, investors of these units will be forced to differentiate their product by offering more practical solutions to small living spaces while assuring the quality of units. Small apartments can be built in ways that allow for extra storage to deal with the issue of space. Such is by installing platform furniture –bed and couch platforms- with drawers underneath or on the side rails incorporated into the footboard of the bed, or by creating storage space on either side of a couch platform. In raised floors, a platform should provide ample aeration space for the mattress. Additionally, to create working spaces, an undercover pullout table can be built into a kitchen unit for uses such as eating and work then be slid back into place when not in use. While these modifications are excellent for tiny studio apartments and bedsitters, they can be adopted into children’s bedrooms where spaces might be smaller than other parts of the house to allow better storage of kids’ belongings and to provide a fun play space.
Another application of use is the bigger multi-roomed apartments. When moving houses, beds, tables, chairs, and couches are lagged up the stairs, chipping off the plastered walls and making spoil the furniture on its way into a rental house. In some extreme cases where the staircase is very narrow, movers are forced to use ropes to pull up the furniture. However practical, owners of the larger four and five bedroom apartments may not be enthusiastic about the model.
If adopted, property owners can make savings in staircase repairs and wall painting. However, when installed into buildings, owners may stipulate regulations of use by tenants, requiring payments on repairs in case of damage. And while it may seem like a lot of work, on a scale against the advantages, this is a small price to pay as owners are more likely to attract a larger number of tenants over a long period.
One of the main limitations on the height of apartment buildings is the requirement to install a lift if the building is over four floors high. For an apartment block, the lift has to be big enough to fit the three-seater couch. Bigger beds are usually dismantled and moved in as modular pieces. With this new model, there are no huge coaches and beds, meaning the lifts can be the standard sizes used in office buildings.
Perhaps one of the ways to get started on platform furniture is to have furniture companies provide customized platform furniture. As with all human practices, once a preference is set, more people will begin to seek similar convenient options.
Kenya Real Estate trends
Rising Interest by Investors in the Western Kenya Region
The lakeside city, Kisumu, has been on the limelight over the past few years over growing investment in the property market with the development of residential apartments and commercial buildings including shopping malls, office spaces, and higher learning institutions. According to a Cytton Investment report, the total per annum returns were 13.3% for property investments in Kisumu as of 2016. Income yields and capital appreciations were 4.8 and 8.5 percent respectively indicating a relatively good performance in the property market.
Kisumu’s infrastructure development, rising populations, growing tourism, and extensive housing upgrade are some of the factors that have led to increased development of real estate in Kisumu. The county government’s modernization plan has also played a significant role in boosting the real estate market. Major property setups that have been carried out include the Milimani Hotel at the cost of Ksh. 850 million, and the Victoria International Conference Centre along Dunga Beach along a 5acre tract of land while various residential developments have begun to sprout in areas such as Kondele, Mamboleo, Riat Hills and Bandani areas. It is quickly becoming a considerably good investment region as investors continue to capitalise on Nyanza. Property prices in the area have risen to 500 percent. Being the hub of the western region and a point of transit to/from neighbouring Uganda, Kisumu’s property market is expected to continue growing.
Nairobi’s rising demand for high-end homes and apartments
According to a report by Knight Frank, 46% of Kenya’s high net worth individuals are likely to buy additional homes within the next two years. This is attributed to the increasing purchase of high-end homes by foreigners in Nairobi. The growing demand has facilitated the rise in prices for the local luxury homes market, a change that has seen developers reap substantial gains. High net worth individuals allocate the largest portion of their wealth in real estate investment with an emphasis on capital preservation. The report adds that the prime locations are popular among high-end buyers because of their controlled development and relatively better infrastructure.
As the rising demand for both local and international investors, Kenya remains one of the top 100 most expensive cities to buy a high-end home or apartment, at US$ 1681 per square meters for apartments ahead of countries such as Croatia, Puerto Rico, Jordan, and Africa’s Morocco, Egypt, and Tanzania among others. The surge in prices of high-end properties in Kenya, however, is set to keep raising owing to economic stabilisation
Global Real Estate trends
Growing Global interest in the Central and Eastern Europe Region
Central & Eastern Europe started the year with EUR 2.3 billion in real estate investments in the first quarter of 2017, representing a 41 percent growth compared to the first quarter of 2016 attributed to cross-border and domestic flows reaching EUR 2.5 billion in 2016 which indicated a strong sign of maturity. More investors looking for viable investment markets have moved from southern Europe into Central and Eastern Region where platform deals and corporate activity via OPCO/PROPCO structures have been on the rise since 2014 owing to the abundance of equity in the market invested by private equity houses looking to expand quickly.
While the CEE region has long been supported by foreign investments from the USA and Western Europe, new investors moving into the market include China, Israel, and South Africa among others. South African investors are motivated by the low cost of debt at 3 percent or under in CEE with yields on prime property going to an excess of 6 percent or more. With a softening South African real estate market, the cost of funding far exceed the average yields, which currently stand at 9 percent and 5 percent respectively. As the Kenyan real estate market matures into a striking similarity to South Africa, this is one of the factors that Kenyan construction stakeholders should be concerned about.
Canada: The increasing housing Unaffordability
Housing unaffordability in Canada has advanced for over 27 years owing to various factors in the economy. Including these are sharp increases in home prices and rents which continue to surpass income growth, accelerating a socio-economic polarization which consequently makes housing in the urban core inaccessible to lower and middle income earners. In Toronto, housing prices have doubled relative to incomes since 2000, while in Calgary, new housing prices have risen to three times the household incomes. The same continues to happen in cities such as Montreal, Halifax, Saskatoon, and Rega. Furthermore, poor government policy continues to subject low-income earners to provincial and federal claw backs and tax backs.
Also facing Canada’s housing problem is foreign investment. With investors from China, India, Europe and the Middle East venturing into the real estate market, property prices have been driven upwards in various provinces. This has negatively impacted on the availability of housing for Canadians. Looking at the same case in Kenya, property prices have been driven up by the increasing demand by the growing middle-income earners. However, as property prices continue to rise due to land appreciation and high construction costs which are passed down to buyers, homes remain unaffordable to more middle income and lower income earners.
This week in the Kenya Real Estate market
This week’s focus is on sales and rental prices for five bed-roomed houses for three areas located in Nairobi’s Zone 13. These included Kitisuru, Ridgeways, and Garden Estate on Kiambu Road. Data used was derived from real estate listings by property firms in the city, and analysis was done to provide a picture of what to expect when either purchasing or considering to rent in the areas mentioned. While Garden Estate recorded both minimum and maximum purchase prices, the area was characterized by non-uniformity in property prices unlike Kitisuru and Ridgeways, however remaining affordable with high savings margins.
Buying Prices – Five (5) Bedroom Houses
Rental Prices – Five (5) bedroom Houses
Kenya Interest rate watch
Treasury bills were undersubscribed at 73.69%, down from 79.84% the previous week. The 91 –Day, 182-Day and 364 –Day bills yielded 8.001%, 10.529%, and 11.087% rates respectively with the 364 Day bills outperforming the rest at 84.32%.
The 91 Day bills subscribed the poorest at 36.71% down from 125.51% the previous week due to poor yields. Out of the 24 million government offered treasury bills, the total accepted bids were 14,554,360 million.
Kenya equities market watch
Total shares traded during the week increased by a margin of 85 percent up from 20,551,300 shares the previous week. Major indices –the NASI, and the NSE 25 Share index declined by 1.78 & 1.14 percent respectively. Market capitalization decreased by 1.78 percent indicating depreciation in prices due to increased trading. I-REIT Turnover rose by 80.2 percent after an increased number of deals, up to 125 percent from the previous 4 for the week ended December, 8th indicating a shift to real estate trading.
Market analysis summary
After being a top loser the previous week, Uchumi Supermarkets dominated the gainers’ chart at 9.21 up from a loss of 8.11 the previous week. Other top gainers of the week were Liberty Holdings, Home Afrika Limited, Sasini, and ARM Cement, with ARM closing the top gainers’ chart at a 1.72 gain.
The top three losers of the week were Standard Media Group, Nairobi’s Securities Exchange, and I&M Holdings, closing at 33.75, 20.25 and 120, share prices down by 10, 4.71, and 3.23 respectively. Stanlib Fahari I-REIT closed at 10.7 share price after active trading in the securities exchange.
Currency highlights
After a two week gain against the dollar, the shilling weakened at a rate of 0.254. Similarly, performance against the Euro and the Sterling Pound declined at 0.649 and 0.689 respectively, after an improved performance the previous week. Against the international currencies, the shilling performed dismally.
In the East African region, however, the shilling gained at a rate of 0.136 and 0.045 against the Ugandan and the Tanzanian shilling respectively.
