Factors that will drive property sector in 2016

As per the latest data released by Kenya National Bureau of Statistics, the real estate sector’s year-on-year growth as at end of third quarter 2015 was 5.4 per cent and with the overall sector contribution to Gross Domestic Product remaining is eight per cent. The growth in the real estate sector has been driven by heavy government investment in infrastructure, which has opened up satellite towns, for instance for the Nairobi metropolis, towns such as Ruaka, Mlolongo and Athi River and devolved government system that has created investment and development opportunity in the counties as the onus is on each county to fund development. Favourable demographic trends including the burgeoning middle class that is spurring development across all real estate sectors have also driven the sector’s growth.

This year, the sector’s growth shall be driven by:

  • Growing Middle Class: The rapidly expanding middle class in the country is searching for affordable, secure and aspirational living, which meets their housing needs. With the increased congestion within the crowded city centres, this middle class will have to be housed in the outskirts of Nairobi which have benefited from infrastructural upgrades
  • Huge Housing Deficit: According to the National Housing Corporation, there is an effective housing deficit of over 200,000 units per annum to cater for the low to middle income market with Nairobi and its metro accounting for over 50 per cent.
  • Sustained investment in infrastructure: Increased development along key infrastructural nodes, which have been brought about by the development bypasses such as Ruaka and Karen are now attractive real estate development zones. The Standard Gauge Railway and LAPPSET corridors will also experience the same effect
  • Widespread economic growth: Increased need for real estate development in devolved units to offer accommodation to the SMEs and the county staff. This is further increased through the rapid growth of SMEs which employ up to 85 per cent of the work force and require space for office use.
  • Demographic trends: The youth bulge (growing number of 21 to 35-year olds) as well as rapid urbanisation, have created an opportunity for development which caters to their needs e.g. middle-income housing, and their lifestyle such as suburban retail malls
  • Devolution and political goodwill: Devolution is assisting real estate development as it is placing onus on the county governments to improve the real estate landscape, which has led to reduced bureaucracy and investment in infrastructure. Nevertheless, the upcoming general election in 2017 will see a slowdown in selected markets especially areas previously affected by political tensions in the past. For instance parts of Rift Valley, Nyanza region and the Coastal regions.

Source: The Star

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