Growth in the Real Estate sector in the country is expected to remain neutral this year according to the latest projections by real estate company Cytonn Investments in their latest report dubbed Real Estate Sector 2022 Market Outlook.
According to the report, the sector is expected to experience improvements in the business environment leading to increased transactions driven by Infrastructural Development with the government implementing various infrastructural development projects, especially in road construction.
“Country’s road network coverage currently at 161,451 Km and valued at over Ksh.3.5 trillion as at 2021, signifying heavy investment towards the sector. In general, infrastructure development continues to be a factor supporting the growth of the Real Estate sector through opening up areas for Real Estate investments” reads the report.
Kenya’s high urbanisation and population growth rates of 4.0% p.a and 2.3% p.a respectively which is relatively higher than the global average of 1.8% p.a and 1.0% p.a respectively will also drive increased demand for Real Estate developments.
Other significant drivers will include expansion of local and international retailers, improved hotel and serviced apartments operations, focus on affordable mortgage and statutory reforms supporting the real estate sector
However, the sector is expected to face threats including financial constraints that have forced developers to stall and put on hold their projects as banks limit lending due to the increasing non-performing loans.
Q3 ‘2021 saw 1.5% increase in the gross non-performing loans advanced to the Real Estate sector to Ksh.69.2 billion from Ksh.68.2 billion recorded in Q2 of 2021, accounting for 14.9% of the total Real Estate loan book.
According to the report, oversupply in select sectors constrained financing, Covid-19 uncertainty, travel restrictions and the shift towards e-commerce.
With Kenya preparing for elections, there are concerns that investors would be conservative in the markets.
Lina Onyango, a Real Estate analyst at Cytonn says the August elections won’t have a huge impact.
“In as much as elections have been proven to affect the economy badly, it can’t take the economy down below the pandemic levels. So in as much as it will affect to some extent we’re also witnessing recoveries,” she said.
Residential sectors, Commercial Office, Retail sector and hospitality sector will remain neutral. Land sector is expected to improve with an annual capital appreciation of 2.6% while the infrastructure sector will be driven by government projects.
Listed real estate on the other hand is expected to continue to perform poorly in 2022.
