2013 Real Estate outlook With the new government taking shape, - TopicsExpress



          

2013 Real Estate outlook With the new government taking shape, there are key factors that will affect the growth and development of the sector this year.Despite challenges, the prospects for the real estate sector in the long-term appear promising. Mentor Holdings Executive Chairman DANIEL OJIJO reveals factors that will shape up the real estate sector in 2013. Will the housing demand ease with this new government? As an industry, we expect to see the huge demand for housing continuing in 2013, owing to the fact that there is still a huge housing deficit in this country. This means that investors will find this market attractive. It is my hope that the new Housing and Lands Secretary will give incentives to spur growth in the sector. With the mortgage market set for tremendous growth over the next decade and huge expectations on the easing of the economy. The key factor is the government incentives to developers to reduce this widening housing demand.So far, the incentives introduced have not been sufficient enough to make housing affordable especially to the lower income group where the demand is high and the supply is critical. During the campaigns to the run up to elections, the Jubilee Coalitions’ manifesto offered incentives to accelerate growth within the financial sector that will in turn directly affect the property market. They promised that budgetary allocation will be enhanced as well as sourcing of funds from development partners to assist in providing cash needed to stimulate construction of affordable houses to meet growing demand. In 2010, the Ministry of Housing under SoitaShitandarevised the incentives although this may not have been enough. Most players in the sector hope that the new appointed Treasury Secretary will provide more incentives in the sector. The current incentives should be expanded to cover more areas so as to stimulate more investments as well as tame imbalances in the market. What about mortgage penetration and high Interest rates? Another key area that will shape the market is the Interest rates which are expected to reduce, as pressure is put on the Central Bank and other banks, by investors, developers, bank customers and other stakeholders. The mortgage rates in Kenya are too expensive making penetration slim. For investors who would like to buy a property and rent it, the best return the market will give is between 6 to 8 per cent. So if you are paying your mortgage at an interest of 18%, the Math doesn’t add up. This makes mortgages in accessible to most people. From the recently released Hass consult property index of the first quarter of 2013, it was evident that the lending rates were running at a far higher level than is the norm. Due to the stiff competition that banks are facing, SME financiers are becoming a popular business outlet because of their lower interest rates as compared to what the mainstream banks have been offering. It is very positive for the real estate market to see that the Co-operative Sacco’s are giving better lending facilities. With this kind of healthy competition, interest rates cannot remain high much longer and we hope the new regime will deliver on its promise of affordable credit facilities. Will land regulations help ease the skyrocketing land prices? Developers believe that the new government will support the recently inaugurated National Land Commission to help implement the land regulations. The greatest challenge to the real estate market has been the uncontrolled land prices that has made property prices sky rocket.Our expectations are that the changeswill be gradual. Even though it will take more time for some of the land bills implementation, it will help ease the burden of land acquisition. How will the inflation rates coming down affect the industry? Recent reports indicate that the rate of inflation has also started to reduce. Statistics by the Kenya National Bureau of Statistics show that the inflation rate in Kenya was recorded at 4.11 percent in March of 2013, a down fall from 4.45 reported in February. This is good news for the real estate sector as it means that the prices of basic construction equipment’s will stabilize, guaranteeing both the investors and the buyers a peace of mind. Will the returns on property investment change? The returns in Kenya’s property market are usually about 30 per cent on development and up to 8 per cent on rentals. The real estate market has always been a very solid investment and even though it is not mature yet, it is a growing market with a lot of opportunities. We expect that with the stabilization of the economy and the maturity of county governments, the market will outperform other markets, therefore giving better return on investors.With the development of the real estate investment trusts (REITs) return, we are seeing institutional investors pumping billions in real estate projects. This makes the industry solid and a promising investment venture. Source: homeskenya/homeskenya/index.php/homeskenya-news/74-2013-real-estate-outlook
Posted on: Mon, 22 Jul 2013 07:44:41 +0000

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