This Property Is Not For Sale
As you travel around Nairobi, especially in the suburbs, you will come across empty parcels of land bearing a sign that the piece of property is not available for sale. Unlike the 'For Sale' "For Lease' or 'To Let' signs that are a common feature in cities across the world, this new type of signage may be a sign of a property bubble in Nairobi.
Not many people of my age realize that real estate in Kenya has not always been hot as it is today. At the turn of the century, just as the dot com bubble was bursting in the West, the real estate market almost ground to a halt in Nairobi. It's hard to believe that property owners were having a hard time selling their property less than a decade ago.
Fast forward to 2008, and sellers are turning away buyers with the hope of making more money from the next prospective buyer.
Con men having noticed the desperation of buyers have taken to selling other people's land. With the help of a broken land registry system and corrupt civil servants, it's not unusual for a piece of land to be fraudulently sold to several buyers. It is for this reason that 'This Land Is Not For Sale' signs are springing up all over the country.
All this makes me wonder at what inning is the real estate market in Kenya or Nairobi to be specific.
Many have quickly forgotten the NSE IPO mania and the numerous pyramid schemes that were a feature of the yester-years and continue to argue that real estate will always appreciate in Nairobi and it's environs.
One thing that I am sure of is that there will be plenty of bag holders, in this case land lords, when the property market in Nairobi starts to cool owing to the over supply of property. What's more is that the current infrastructure can barely support the mushrooming of apartments that are being built by over-zealous property owners.
And if you think I'm dreaming this up, look up what is happening in the Sunny State of Florida that was the dream place to live for a lot of Americans and Europeans.
11 comments:
The upper/middle market definitely has a bubble which may get burst this yr. The apartment craze is the one I don't get since employment would have to be growing very fast to support such growth...
In October last year, the East African once argued that part of the reason real estate is so hot is that it has become v. difficult to transfer more than $10,000 to the Western countries since 9/11. Apparently drug and other monies are being invested in real estate, hence the run-way prices. But then again, this region has one of the wprld's fastest growing population (Uganda is 5th largest), and the bare minimum that all these people need are food and shelter-mitumba, China, Bangkok et al are taking care of clothing. If I could, I'd invest in real estate now.
prices are tumbling all over the world, from Japan to USA and Russia the same thing applies. This means for some the opportunities are wonderful. China is moving in the USA and buying all those sub-prime properties, making a killing and laughing all the way to the bank. in Uk estate dwellers are being bribed to leave their homes and they are let to the bankers who are not able to pay mortgages due to credit crunch.
I don't get the apartment craze.Just wait when the apts get old.People will discover it aint worth Ksh 8 million.
I do agree that the global credit crunch has slowed down the economy and property prices in most regions particularly the western world.
However, markets in the East African region are amongst the most robust, and will continue to be interesting for investors. The market appears to be insulated from the slowdown. African economy is illiquid and is unlikely to be shaken by the global credit crunch. Although we might see a slowdown in investments, I doubt if the region will experience what the likes of US and UK are going through.
The article below has more details…
http://www.prlog.org/10131559-has-east-african-real-estate-market-escaped-global-credit-crunch.html
Maina, I agree with your sub-prime observations of corruption.
PKW, I believe they'll be plenty of opportunities ahead.
Anon, And we continue to wonder why Kenya is immune to the downturn.
Pesa 2, I'm told there is no shortage of sub-standard workmanship.
Ferdy, Thanks for the link but i hope you've been in the business for more than 10 years.
Population growth without income growth means lower per capita income.
Africa (incl Kenya) is urbanising but can the new residents afford the current prices?
Financing (unlike the UK or USA) is limited to 90% (best case) but more usually 75% max.
The answer is NO. I expect a slowdown in sales. Rents are at 5% of the price.
I agree with most observations here.
For instance a 5 bed in Runda is asking for btwn 30 to 40m to return 150k rent. I just don't get it unless someone thinks we'll be breaking 100m for these properties in the next 5 years. It's insane..
A bubble is possible especially in the middle/upper income markets.
For the lower income market, the demand is phenomenon...I do not expect this market to be affected.
I wish we had some innovative financing methods
EK, Here in the US, the low to mid income markets have been hit hardest. All of a sudden housing demand has completely dried up. All this is happening despite the fact that housing in America is usually more affordable than other western countries. We have homes selling for $1 and no one is buying.
http://lovelymoney.blogspot.com/2008/08/one-dollar-homes-while-stocks-last.html
The same could happen in Nairobi.
Well one thing about Kenya that differentiates it from US and other western countries is the form of financing...in Kenya it is shorter and the mortgages are not repackaged. So I doubt we will ever have $1 homes that cannotfind a buyer.
My first after I cleared my undergraduate in 2004 was a mortgage loan officer...and I can tell you we used to hand out mortgages like githeri. The job was commission-based so we didnt care much about the ability of the person to pay off the mortgage as long as we got the commission.
No wonder many people signed up for mortgages they can not afford.
Kenya's situation is different...the default rate is lower and low to mid income property is still very marketable
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