Real Estate Investor Magazine South Africa Real Estate Investor Magazine - August 2017 | Page 49

AFRICA
Kenya’s Housing Market
Opportunities for investment
BY JOSEPH MAINA
P
lans by the Kenyan government to increase the
formal supply of affordable housing have so far
not been successful, a report released by the
World Bank in April shows.
The report, titled “Housing and Housing Finance
in Kenya – Unaffordable and Unavailable”, says Kenya
has an estimated accumulated housing deficit of
over 2 million units, with nearly 61 percent of urban
households living in slums.
At least 244,000 housing units in different market
segments are needed annually to keep up with
the country’s demand for housing, yet the current
production is less than 50,000 units.
Kenya’s first medium term plan under its Vision
2030 blueprint aimed to provide 200,000 housing
units between the years 2009-2012, but only 3,000
units were provided during the period. The second
medium term plan running between 2013-2017 has a
similar target of housing units, focusing primarily on
the lower income households.
The report predicts a steady growth of the country’s
housing needs up to year 2050, from where they will
begin to level. It further says that while the demand
for housing is currently higher in rural areas than in
cities and towns, the reverse is expected starting from
2018, when majority of new housing will be needed in
urban areas.
Kenya’s urban population is currently growing at the
rate of 4.4% per year, which is higher than the average
3.6% across Sub-Saharan Africa. The report points to a
drop in investment in both government and the private
sector in meeting their respective housing targets.
As an example, the country’s capital city, Nairobi,
has a public target of developing 150,000-200,000
housing units annually, but planning applications were
only 15,000 units in 2013.
Property prices in the formal market have been
increasing, with Nairobi ranked as the highest priced
city in Africa, adds the report. This has only served
to widen the affordability gap, in a country where the
cheapest house formally built by a developer was Ksh
1,342,106 (approx $15,300) in December 2012.
The report cites low or informal incomes, combined
with high financing costs, as some of the reasons holding
back the demand for housing finance. Currently, the
cheapest formally built property costs Ksh 1.8 million
($17,315), but only about 10.2% of urban households
could afford the cheapest priced house in 2015. Despite
limited supply of housing finance, the country’s
mortgage market has been growing at 30% annually,
according to the Central Bank of Kenya.
With this shortage of affordable housing and the
country’s tourism opportunities, investors would be
wise to consider the development of Kenya’s property
market.