Kenyans keep real estate as preferred investment vehicle
Real estate has emerged as the most preferred investment vehicle among Kenyans despite the recent excitement generated by shares at the Nairobi Stock Exchange.
A market survey by a group of leading land and property experts has shown that shares at the Nairobi Stock Exchange and Government securities were the closest competing alternatives with bank deposits at the base of the ladder. The exploratory survey had 41 per cent of investors saying they preferred land to all other investment choices as opposed to 25 per cent who preferred trading in the stock market. Only 22 per cent opted for government securities as an investment choice.
According to Nelly Mbugua of Kenya Valuers, investors who initially buy land for speculative purposes end up entering the lucrative business of real estate development.
“Kenyans now buy land for development purposes as land with property is much more profitable in the long run than an undeveloped plot, especially for areas close to the urban centers,” said Ms Mbugua.
A resurging economy that grew by 5.8 per cent last year has seen an increase in land values due to a housing boom in the upper middle and upper class zones. Ms Mbugua said this had pulled investors to real estate although trading in shares was also picking up due to high liquidity in the market.
The high liquidity has attracted competitive mortgage products as well as unsecured loan packages giving investors capital venture into the real estate business.
The shift in investment outlook towards property development is being felt in major urban centres, particularly Nairobi, Kisumu and Mombasa as people start accepting living in towns beyond the working age.
This has spawned demand for residential and commercial properties adjacent to urban centres. Mr Moses Nyakiogora, the chairman of Institute of Quantity Surveyors of Kenya, said that long term financial security was the main factor behind preference for real estate by investors.
“If you invest in real estate then you have some security in the form of property that you have put up,” said Mr Nyakiogora.
Mr Nyakiogora, however, insisted that due to the huge amount of money involved, the interest in real estate may soon be overtaken by shares, which accommodate people from across all income categories.
The research was carried out by a group of property experts as part of their preparation towards setting up a Kenya Property Index (KREX) that will be used to gauge the level of land and housing transactions in the market.
The report was based on responses from financial institutions, insurance companies, fund managers, property owners and high net worth individual investors among others.