Want to join real estate? Here is where to bank on

Apartments and bungalows have the highest returns on investment, the first housing survey by Kenyan banks reveals.

The Housing Price Index survey found that the two types of housing units are the most popular across the country with the expanding middle class and the rapidly rising value of land cited as the key accelerators of the trend.

Between the second quarter of 2013 and last year, the average price of an apartment increased by 12 per cent while that of a bungalow rose 10.2 per cent over the same period.

“The overall change in quarter-to-quarter basis shows higher price movements in the two housing unit types than any other,” said Mr Jared Osoro, Kenya Bankers Association centre for research director.

SCIENTIFIC APPROACH

A consistent increase in the price of a commodity is usually a pointer to high demand. The bankers said the middle class has been driving up the uptake of houses.

“Apartments are seen to be more attractive to the middle class and that is why we are witnessing the sharp upward price movements,” Mr Osoro noted.

On the other hand, the demand for bungalows, houses with mainly one storey, is driven by buyers’ desire to own the land they sit on.

“A prospective buyer for a bungalow looks at the possibility to put up apartments which would ultimately push up their returns upon selling,” Mr Osoro said.

The bankers said their survey seeks to provide policymakers and investors with a scientific approach to tracking changes in the vibrant housing industry.

The bankers association found that prices of penthouse — an apartment on the top floor of a tall building — and other housing types such as town houses and maisonettes did not display strong positive price changes, indicating low demand.

A real estate developer who invested in a maisonette in June 2013 only to resell it a year later for instance made a return on investment of 5.7 per cent, according to the research that tracked real estate performance in 21 key urban areas across Kenya.

A recent survey by HassConsult, a firm that also monitors property costs, said land prices in Nairobi have increased five-fold over the past seven years with Upper Hill emerging the hottest address in the city.

GROWING MIDDLE CLASS

The study indicated that land prices in the capital have appreciated by a massive 535 per cent with an acre that cost around Sh30 million seven years ago now going for Sh170 million. This underlines the speed at which the value of land is gaining value across the country.

Land in Upper Hill is the most expensive with an acre going for Sh470 million, followed by Milimani at Sh370 million.

Besides the growing middle class and the ever rising value of land, proximity to social amenities was also found to be pushing up demand and therefore the cost of houses.

Housing units located close to modern and luxurious social amenities and high-end neighbourhoods are on high demand despite the fact that they are very costly.

The recent re-basing of the  country’s output pushed the economy into a middle-income status, meaning demand for houses can only go up.

According to a recent analysis by the World Bank on mortgage access in Kenya,  the expanding middle class would continue to  push up demand for houses.

The global lender says Kenya has a housing deficit of 156,000 units every year.