Local investors, first-time home owners, and Kenyans in the diaspora are investing in these properties and reaping over 30 per cent in capital appreciation, industry players say.
According to Charles Kibiru, the chief executive officer at Thika Greens Limited, first-time buyers are the biggest beneficiaries in the market, with close to double capital appreciation.
The value is being driven by an increased interest in affordable luxury living integrated with the serene and secure environments of gated communities.
He says although 80 per cent of people buying the plots do not play golf, their buying decision is primarily influenced by the existence of a championship golf course as well as additional amenities such as a clubhouse, estate infrastructure, five-star and three-star hotels, fibre-optic connections, and community centres, which considerably improve the value of their purchase.
“Capital appreciation could hit the 50 per cent mark in three years and investors will comfortably be able to earn over Sh3 million above their initial capital investment,” says Kibiru.
In June 2012, the annual Wealth Report published by Citi Private Bank and Knight Frank’s Prime International Residential Index (PIRI) tracking, reported that luxury homes in Nairobi, Mombasa, Malindi, and Lamu, were the best-performing prime residential property markets in the world.
Out of the 71 best prime residential property locations surveyed, Nairobi recorded the highest growth, with a 25 per cent increase for high-end residential properties, while the Kenyan coastal town of Mombasa came second with a 20 per cent increase.
The report also said price growth in Nairobi and Mombasa outstripped all other PIRI locations such as Miami, which came third at 19.1 per cent, Jakarta at 14.3 per cent, and London at 12.1 per cent.
Cape Town, the only other African city to feature in the PIRI index, came in at the 21st position with a 2.4 per cent increase.
The report debunked the myth that all safe haven locations are in the Western world.
According to statistics from the Central Bank of Kenya, diaspora remittances to Kenya in February last year amounted to $104 million (Sh9 billion), 71.12 per cent higher than the level in February 2011 and 15.84 per cent higher than what was recorded in January 2012.
Stephen Njoroge, an investor at Thika Greens, says he bought his plot in the gated community two years ago, and that it is now worth 1.5 times the buying price.
“This means that after constructing, the property itself is set to be worth more than two times my initial capital investment,” he says.
Bigger market
Rayhab Gakuhi, the sales and marketing assistant manager at Capital Realty, says that although first-time lifestyle buyers and investors are gaining by a large margin in capital appreciation, even those buying a little later are also enjoying the gains as the market for newly constructed residential and commercial units, is bigger than the supply.
The first buyers at Gable Park in Nairobi were buying a unit at Sh9.5 million, which has risen by Sh1.5 million to its current selling price of Sh11 million.
She expects the prices to experience an upward shift despite this being an election year.
“Sales have not been affected and we do not expect them to be, during or after the elections,” she adds.
With the forecast of a strong economic growth of 5.7 per cent in 2013, Carol Kariuki, the managing director of The Mortgage Company, believes that there will be a positive impact on the Kenyan economy, particularly the mortgage and construction sectors, despite this being an election year.
Kariuki adds that there has not yet been a drop in the level of mortgage demand as the market is still responding positively to the drop in interest rates — by 8 to 10 per cent — which has re-energised the market for project financing.
Historically, she says, whatever the outcome of an election, property prices increase significantly due to positive euphoria from the local and international community, a sentiment Sakina Hassanali, the head of research and marketing at HassConsult, agrees with.
“The strongest price rises seen in the market in recent years came in the post-election year of 2008,” says Hassanali, who believes that 2013 too will be a year of rising demand and upward price movement.
She adds that the market is likely to return to buoyancy as financing moves steadily into a more affordable range, a combination, she asserts, that augurs well for a strong year in real estate.
Kibiru believes that the strong economic growth has seen a huge number of people moving from the lower to middle and upper classes, leading to a quest to live a certain lifestyle.
“Towards the end of the year, if the situation on the ground is stable after the election, price values will have an upward shift as developers will have commenced construction while others will have begun their projects, leading to an exponential growth in real estate,” he says.
Last year’s fourth quarter report by Hass Consult showed that the average value of property has gone up from Sh7.1 million in December 2000 to Sh24.1 million in December 2012.
Price values for standalone houses on plots and in gated communities — maisonettes, bungalows, cottages, and villas — have increased 3.92 times since 2001, this is a 2.3 per cent rise in the last quarter and 11.7 per cent rise in the last year.
The average price for a standalone house is currently at Sh34.5 million, up from Sh8.8 million in December 2000. - Daily Nation
