Activities in the real estate sector are projected to slow down this year as developers adopt a “wait-and-see” approach due to uncertainty ahead of the August 8 general election.
Real estate consultancy and management firm, Knight Frank, says only a handful of developments are expected during the period in the run-up to the election.
The firm said the slowdown will create demand that will sustain the market in the fourth quarter of the year and throughout 2018.
“Up until election we will see less development, which will enable us to absorb the oversupply that we have in the market and allow the rent to catch up, Knight Frank’s managing director Ben Woodhams said in a telephone interview.
“After the election we will see a new spate of development which will drive the market forward.”
The real estate sector remained nearly stagnant last year as developers struggled with cash flow challenges due to delayed payment by the national and county governments.
This was coupled with an oversupply which started earlier in 2015, causing rent to stagnate over the last one and a half years.
In 2014, the sector faced low prices following an increase in the number of high-end properties that went up for sale.
Increased terrorist threats had also slowed down prices in prime spots like Mombasa. However, the sector is showing signs of improvements. This is associated with a substantial increase in the value of building plans that were approved by various county governments last year.
The Kenya National Bureau of Statistics data show Nairobi county alone had approved building plans valued at Sh268.77 billion in 10 months through October 2016, compared to Sh192.77 billion in a similar period in 2015.
“The substantial increase in the value of building plans granted by Nairobi county to developers in the year 2016 over 2015 is a sign that developers are getting ready to commence their development projects after the August election,” Woodhams said.
Mwenda Thuranira, the regional chairman of the Kenya Property Developers Association at the Coast, said lending to the sector has remained smooth unlike other sectors which are experiencing credit slowdown following the enactment of the law capping interest rates in September.
“Middle and the upper-middle-income residential market is the one that has potential for growth.The activity is very high because of high number of buyers in this segment,” he said.