Kenyan Real Estate Prices Drop

Rising inflation and a growing difficulty for buyers to secure financing is slowing the growth of real estate prices in real terms in East Africa’s largest economy. The …

Rising inflation and a growing difficulty for buyers to secure financing is slowing the growth of real estate prices in real terms in East Africa’s largest economy. The prices are on the rise but are still below inflation and expected to keep falling. Interested investors hope this will change, though, with the creation of the East Africa Regional Real Estate Training Center (EARRETC). The hope is that the group will help establish and enforce real estate market standards, which are lacking in Kenya’s emerging market. This has the effect of discouraging potential investors and the formation of best practices in business should help improve prices in the long term. For more on this continue reading the following article from PropertyWire.

Residential property prices in Kenya slowed in real terms in the second quarter of 2011 when rising inflation hit buyers’ hard, according to the latest HassConsult real estate index.

The company, which conducts the only property pricing index in east Africa’s largest economy, said average house prices rose by 1.9% in the second quarter compared with 4.4% in the first quarter.

‘Where houses sellers pushed asking prices up by 4.4% in the first quarter of this year, the average rise across all types of properties was just 1.9% between April and June,’ said Farhana Hassanali, property development manager at HassConsult.

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‘It is reflecting an increase that was below inflation and thus a fall in house prices in real terms,’ added Hassanali.

Returns from real estate investment in Kenya outpaced those from investments in stocks over the decade since 2000, a study by a Kenyan fund manager showed earlier this year. Building and construction as well as agriculture drove an estimated 5.1% expansion of Kenya’s economy in 2010.
HassConsult said they expected property prices to be strained in coming months as developers seek to cover their costs and buyers enter the market with tighter budgets.
 
The firm said high crude prices had also affected housing developers as construction inputs rose, but could not be passed on in higher property prices.
 
Despite continued demand, there was now not enough pent up demand to keep pushing prices significantly higher, it added.

Meanwhile, the International Real Property Foundation (IRPF) is moving to establish an East Africa Regional Real Estate Training Center (EARRETC) to serve real estate professionals in Rwanda, Uganda, and Kenya.

‘Global real estate markets are a composite of all markets in the world. Since emerging markets lack essential international standards of practice and ethics, doing business in these markets is very difficult for the more sophisticated practitioner. The work of the Foundation is to teach and train practitioners in elevated world practices,’ said Norman Flynn, president and chief executive officer of the IRPF.

IRPF consultant Judith Lindenau has visited the three East African countries to train members of the Association of Real Estate Agents Uganda (AREA), the Institution of Surveyors of Kenya (ISK), and the Real Estate Association of Rwanda (REAR). She also advised on association management, codes of ethics and enforcement.
 
Plans for the near future include advanced appraisal courses in machinery and equipment valuation and business valuation. Lindenau said that she sees great potential in all three countries.
 
‘This will open markets, not unlike those emerging markets that recently ascended to the European Union, for investment and business internationally. Africa is a sleeping giant that has great resources that when opened to the rest of the real estate community will blossom in a potentially very profitable way for all concerned,’ explained Flynn.

‘For emerging market countries, the type of exposure that can come from being part of a global professional network is substantial. We are committed to bringing emerging market organizations into the global community by helping them adopt global business, professional and technical standards that are the foundation of ICREA membership, thereby raising the bar for many newly formed organizations,’ said Thijs Stoffer, chief executive officer of ICREA.

This article was republished with permission from PropertyWire.

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