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High Costs Slow Down Pace of Homeownership Countrywide
[September 17, 2014]

High Costs Slow Down Pace of Homeownership Countrywide


(AllAfrica Via Acquire Media NewsEdge) Nairobi is among few cities in sub-Saharan Africa that could offer active foreign investors higher reward in the real estate sector, but high financing costs are prohibiting the market's growth.

Research commissioned by London-based Royal Institution of Chartered Surveyors report lumps it together with Nigeria's Lagos, Luanda in Angola and Johannesburg in South Africa.

RICS says the high cost of financing property purchase is most acute in the country's residential segment where potential homebuyers have shunned mortgages.

Mortgage rates averaged above 20 per cent in late 2012 and have since only climbed down to an average of 17 per cent in the first half of this year.

"As a result, residential selling prices in the middle-income market have fallen and there appears to be a deficit in the supply of good quality housing stock," the organisation states in the report.

The strain has been further exacerbated by diminishing land in urban areas owing to a surge in population, piling pressure on services and infrastructure.

Land costs in Kenya are prohibiting housing supply, RICS says, making many developments unfeasible when financing costs are factored.

"It is likely that in the medium term, developments will increasingly be high-rise and mixed-use in form and function, speaking to the aspirational lifestyle values of the growing middle class," it states.

As a result, the many gated developments and live-in golf estates are expected to evolve into satellite cities, which will ease pressure off Nairobi as they increasingly lure new retail offerings.

RICS expects that more developers will follow in the footsteps of Home Afrika Ltd to list on the Nairobi Securities Exchange, which will help increase capital access and investment base through recently enacted Real Estate Investment Trusts.



No developer is yet to list a REIT scheme as the approval process is stringent compared to those seeking management and trustee licences.

The built environment is also faced with labour-related challenges with less than 11,000 professionals registered under the five bodies in the construction sector. For instance, quantity surveyors and architects assume the role of project managers, which compromises quality.


"This often means that projects are poorly managed and documented, and due to time and budget constraint overruns, quality is often compromised," RICS says, citing the Institute of Quantity Surveyors of Kenya.

RICS commissioned the research to help it understand the role it could play in sub-Saharan Africa by assessing the potential future demand for services of built environment professionals.

Case studies in the report titled 'Unleashing sub-Saharan Africa property markets' focus on South Africa, Kenya, Ghana, Nigeria and Tanzania. The RICS governing council widened its operations in November 2013 to include sub-Saharan Africa countries with a key focus on Ghana, Kenya and South Africa.

RICS says there is need to improve transparency, reliability and availability of data in real estate markets across the continent if foreign investment is to be encouraged.

Copyright The Star. Distributed by AllAfrica Global Media (allAfrica.com).

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