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The People ­ Friday
Date: 13.01.2017
Page 23
Article size: 735 cm2
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AVE: 206126.66
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turns averaging 25.8 per cent across all
themes, with the best performing areas
being retail and offices with average
yields of 10 per cent and 9.4 per cent,
respectively, according to Cyntonn.
Analysts say elections always affect
markets all over the world and Kenya is
no exception. Fears about a change of
government creates insecurity, resulting
in a volatile environment.
Elections could also lead to a slow­
could break out," warned Cytonn In­
vestments Real Estate Services Man­
ager, Johnson Denge, in an interview
with People Daily.
"Apprehension makes one adopt a
wait­and­see attitude. Political uncer­
tainty does not auger well for the market
if the past is anything to go by. Prices
and rents are expected to tumble," he
said.
likely to experience shocks
in the run up to this year's
Property developers at the Coast
concur, saying the political season
is signaling a threat to the growth of
property markets. Goldwyne — a real
estate consulting firm — CEO, Benedict
Mutuku, said some buyers are scared
of purchasing properties at the Coast.
"The markets are already a bit slow;
General Election.
we are in a wait­and­see situation dur­
by Wahinya Henry and
Harrison Kivisu
J^PeopleDailyKe
V layers in real estate are
predicting the sector is
They say a sluggish
economy caused by heightened po­
litical campaigns could jolt the market,
particularly in the second half of the
year. There are fears also some inves­
tors may take advantage to make a kill
by cashing on the uncertainty.
Schemes are being hatched to buy
property at lower prices for disposal at
higher prices once normalcy returns af­
ter the elections. "It can even be worse
for investors and developers who ar­
rive at the conclusion election violence
down in certain markets, especially in
areas affected by political tensions in
the past. "Other constraints likely to im­
pact on real estate development during
the year include high land and construc­
tion costs," says Denge.
According to HassConsult, high land
prices in Nairobi have seen develop­
ers move to the outskirts where land
is cheaper. Whereas an acre of land in
Donholm costs about Sh60 million and
Sh40 million at Mlolongo, a similar par­
cel in Juja goes for Sh10 to Sh15 million.
developments viable in satellite towns
— water, electricity, security and roads.
Following the poor performance of
Reits (Real Estate Investment Trusts)
at the Nairobi Securities Exchange last
year, investors are likely to shy away
from the capital markets. In addition,
banks are less likely to advance loans
to small and medium­sized companies
with the low interest rates capped at 14
per cent per year, preferring instead to
lend to the government and big firms.
Cyntonn says increased supply in
some sectors such as the upper mid­
end residential sector will result in com­
petition, lowering returns for investors.
The office sector is also likely to experi­
ence high competition, with the increas­
ing office space supply in Nairobi's key
nodes such as Upperhill and Westlands.
This could lead to lower occupancy and
thus lower yields for investors.
Politics aside, experts predict the
sector will continue to prosper. "Invest­
Construction costs will nevertheless
ments in the real estate are still attrac­
remain high, as developers have to in­
tive. Despite a few constraints, growth
cur infrastructural costs to make their
of businesses, increased infrastructural
development and improved operating
and legal environment are expected to
drive real estate investments in 2017,"
says Caleb Mugendi of Cyn­
ing this political season. The few who
buy houses are opting for three bed­
room apartments and below going for
Sh10 million or less," said Mutuku.
However, MwendaThuranira, CEO
for MySpace Properties Company of
Mombasa, is more optimistic. "The
political temperatures will at some ex­
tent— though not much— affect the
property business. But as property de­
velopers, we are optimistic of the ever
growing industry," he said.
In 2016, real estate delivered high re­
Ipsos Kenya ­ Acorn House,97 James Gichuru Road ­ Lavington ­ Nairobi ­ Kenya
tonn.