Kenya bets on housing sector as stocks fail to perform
The housing market in Kenya has reached double digit growth for the first time in five years as a result of a loss of confidence in the financial sector and the weak performance of the stock market.House prices in the in the East African country grew by 14.6 per cent in the last year.
“The main reason for this is that in times of economic uncertainty and market volatility, what you’ll have is people moving towards a safer landing in terms of things they can see and touch – historically property always returns quarter on quarter, it’s not volatile, it’s the best returns,” said Sakina Hassanali, Head of Research and Marketing at Hass Consult.
She adds that most investors see it as the safest landing to put in their funds.“It’s really interesting because we had quite a high growth rate last quarter at 3.6 per cent and then we had another jump this quarter at 4.2 per cent and annually it’s come to about 14 per cent and that is a double digit growth rate,” said Hassanali.
This comes at an interesting time with ratings agencies not performing as well and according to Hassanal, that uncertainty around the market is driving everyone to a market they are sure about, that they have played in for the longest time.
“The stock market is quite infantile; the turmoil you are seeing in the financial sector is all moving people towards something that they know and have grown with, for the last 10/20 years, property has been yielding good results.”
The property market in Kenya is not very volatile and as a result Hassanali says a lot of people go to them saying they would rather invest their money in property than in fixed deposits.
“In 2013/14 we had rampant rent rises to some 20 per cent in those years, and I think this year it is correcting – it’s increased on 5.5 per cent in the last year, where with sales prices it’s been about 14.6 per cent so you can see a massive divide there,” she said.
Hassanali explains that the biggest reason rent in brought down is the supply of apartments, and that is now starting to match the demand which means that rent rises begin to stabilise as more come into the market.
On another note, if you’re looking for mortgages to make sense in Kenya, Hassanali does not reckon that will happen any time soon because of the lending rate.
“Until we see the average lending rate go down, it’s going to be difficult, right now the average lending rate in other countries is about 3-4 per cent, here it’s about 17-20 per cent, that’s a massive gap, until you see that happening I don’t see the mortgage market being a big contributor to the housing markets,” said Sakina Hassanali, Head of Research and Marketing at Hass Consult.
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