The Future of Property Market in Kenya
Over the last few years the property market in East Africa, and by extension Kenya, has witnessed a boom. However, it is uncertain in the minds of policy makers, investors, financiers and developers whether this exponential growth in the sector is indeed a boob or a bubble.
Key pointers that indicate this is a boom and is in fact here to stay are highlighted in this paper.
First, it is a fact that the property market growth in Kenya is demand generated. This is so as the country’s middle class, a group that is able to comfortably service their mortgages, is expanding and with this expansion comes an increase in the demand for property ownership. Due to their purchasing power, this class of property enthusiasts’ desires and demands fine infrastructure- from well designed excellently finished properties to safe and secure neighbourhoods and they are willing and able to pay premium prices for their taste.
Second, It is worth noting that Kenya’s GDP growth in the last five year stands at 4.5% and this growth trajectory is projected to be sustained or even surpassed due to the massive investment in infrastructure and the opening up of the East African Community Market, the multiplier effect of which is that investors both local and foreign will increasingly find this market attractive.
Leading East Africa in this property boob is Nairobi, the Capital city of Kenya. In a publication of the Economist titled ‘Hot Spots 2025: Benchmarking the Future Competitiveness of Cities’ Nairobi is ranked fifth in Africa for its appeal as a capital, business and talent magnet. This report confirms Nairobi’s position as the largest industrial, financial and investment hub in the region. This stature for Nairobi...
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...sumers through rationalisation of the cost of delivery.
Another driver of the property boom is the low level of property consumption in the country, with home ownership in Kenya currently at 16% this represents a huge an unexploited market. On the opposite end is the office space sector which largely remains a buyer market due to oversupply of space especially in Nairobi. However out of central business district offices are relatively more attractive due to the ample parking space and avoidance of traffic congestion.
The property sector according to Kenya National Bureau of Statistics Economic Survey highlights 2013 registered a growth of 21.9% in the fiscal year 2012/2013. The construction sector further registered the highest growth in employment rate due to among other factors Government’s on-going expansive road construction and private construction projects.
The housing market is very unique as unlike other goods and services, houses have permanence, it is a fixed location good causing the rules of supply and demand to be taken to new extremes. In the case of the Toronto housing market we can view in almost real time the role supply and demand play on he ever increasing house prices, additionally the fundamental economic issue of scarcity is made extremely apparent by the limited size of the city of Toronto.
"Famous properties: Boston's signature skyscraper." Journal of Property Management July-Aug. 2004: 8. Academic OneFile. Web. 29 Apr. 2014.
The new millennium brought with it a housing boom which had reached an unsustainable level (Pollock, 2011). Housing prices grew rapidly, and Baker (2010) noted a rise in house prices of over 70% from 1995 to 2006. For example, he noted average home prices in Los Angeles rose more than $400,000 over the period of 1995 to 2006 and approximately $519,000 in San Francisco. Prices around the country increased substantially as well (Baker, 2010). To encourage homeownership, banks promoted creative financing options (i.e. adjustable rate, interest only,...
Priscilla. “The World Economy and Africa.” JSpivey – Home – Wikispaces. 2010. 29 January 2010. .
The situation became even more complex when the British colonial administration introduced a currency-based income tax system. For centuries, the Kenyan economy had largely rested on the exchange of livestock and other goods. With this in mind, it should come as little su...
According to John Vogel’s article “Thinking Outside the Housing Bubble” published in the US News, the housing area aids in job development and increases the opportunity for employment that will assist the United States in solving the recessi...
"Uganda - African Economic Outlook." African Economic Outlook - Measuring the Pulse of Africa. 06 Nov. 2011. Web. 12 Dec. 2011. .
Real estate is defined by the Barron’s Dictionary of Real Estate Terms as the “land and everything more or less attached to it. Ownership below to the center of the earth and above to the heavens.” This definition clearly conveys the geographically fixed nature of real estate and the inherent risk associated with this characteristic that is not found in other financial assets such as stocks and bonds. It is the identification and quantification of these risks that dominates the real estate decision. Regardless of whether a large insurance company is determining if it will insure a “trophy” office property in New York City or Starbucks debating the financial feasibility of a store in a new shopping center, identification of risk is central to the decision-making process. The advent of geographic information systems (GIS) has allowed these decision-makers to better analyze various risk components and draw more informed conclusions.
... as Kenya Plans More EPZs.” East African 22 April 2002. 10 October 2002 <http://www.nationaudio.com/News/EastAFrican/29042002/Business/
Most people, today, are looking forward to buying their first property. When individuals decide to buy a house those individuals would have to look at all their options and all the advantages and disadvantages that come from purchasing a house. The economy plays a huge role in the decision whether people will purchase a house, purchase a condominiums, or rent property.
In order to understand the concept of financialization and the housing market on the global and local level, one must know that there is a global pool of money that is simply the worlds savings bank. In 2000 the pool had $36 trillion and has since doubled in size (Blumberg 2008). Its most recent profit increase was a result of developing countries and cities such as India, Abu Dhabi, and China making money. This doubled the cash pool available for investments, but left fewer solid investments for the taking. The solution was residential mortgages and the US housing market. The investment managers thought the low-risk high-return investment in the housing market was a good, stable idea. The glo...
Kenya is a republic of East Africa. It is bordered by the Indian Ocean on the southeast. The capital of Kenya is Nairobi. It is located in the south central part of the country. It has a population of 1.5 million. The National Musum of Kenya, the National Theater and the University of Nairobi are in the city.
Artadi, Elsa V., and Xavier Sala-i-Martin. The Economic Tragedy of the XXth Century: Growth in Africa. Cambridge, MA: National Bureau of Economic Research, 2003. Print.
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