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Trends That Will Dominate the Real Estate Sector in 2020

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Trends That Will Dominate The Real Estate Sector In 2020 Political And Security Trends In East Africa
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Trends That Will Dominate the Real Estate Sector in 2020 by Demo(m): Sun Mar 2020 10:14am
The latest real estate trends are best described as a mixture of both positive and negative developments. For starters, the prices of real estate property continue to skyrocket, which is being driven by a variety of factors. Such factors include the looming economic downturn and the emergence of a new buyer demographic, in the form of Millennials.

However, some sectors are not that comfortable with the increase in home prices, expressing worries that a housing crash may be on the horizon. Over the last couple of years, the Kenyan economy has witnessed an exponential growth of the middle-class and this trend is likely to carry on to 2020 as the disposable incomes of more Kenyans are projected to increase.

The economic output affects many sectors including investments in the real estate sector. 2019 saw a number of developments in the industry such as the commencement of the Affordable Housing Programme (AHP) by the government, infrastructure development in many parts of the country and also the enactment of laws that affected the real estate sector.

In this article, we shall take a look at what will be carried forward and what trends are likely to change.

Rapid Urbanisation

The housing deficit currently stands at 200,000 units annually arising from a growing population, the demand mainly from an urban population living in slums and student accommodation. This explains the need for low-cost housing and a demand for bed-sitters and one-bedroomed units.

To fulfill the demand for low-cost housing, developers will deploy alternative building technologies that will ultimately reduce construction costs. For a real estate developer, innovative designs that use up space more efficiently will be a huge plus. Locating the units in areas where the cost of living is affordable is also a strategic move for this demographic.

At the same time, developers in satellite towns, e.g. Machakos, Kiambu will have to cater to change of preferences of the middle-class who are taking a liking for the live-work-play lifestyle. This trend has and will continue driving demand for master-planned communities for that holistic approach to living.

Many will opt to construct their own homes having purchased pieces of land in the neighboring towns.

Mortgage Jitters

Mortgage access to buy houses will be affected by the interest rates banks put on the loan facilities. The repeal of section 3B of the Banking that saw the scrapping of the cap on interest rates for banks in 2019, will definitely affect access to these loan facilities.

Banks will now have the authority to increase their interest rates as was the case in 2011 where mortgage rates averaged around 24% for medium-sized banks.

If the situation repeats itself, then loan facilities will greatly affect an individual's ability to purchase residential properties while at the same time reducing the market liquidity of real estate by making alternative investments more attractive to investors.

The Homely, Smart Office

Office spaces have also changed over time, with the need for modern facilities being a huge factor for businesses and organisations alike. Growing SMEs and the settling of multinational companies in Kenya which is considered a leading economic hub in Sub-Saharan Africa has driven demand for the office spaces.

Serviced offices have become popular with renters opting for offices fitted with modern facilities to have that home-like feel.

Smart offices where new building technologies such as green solutions that have been proven to increase employee productivity. Other amenities accommodated in a smart office such as an equipped gym and access ways for people with disabilities also factor in greatly in the development of modern office structures.

The retail space has seen the mall space increase exponentially with the development of Two Rivers Mall, The Hub, TRM and Garden City attracting both local and international brands. E-commerce companies such as Jumia and Glovo have also made their presence known by renting spaces for deliveries of their customers’ products.

The real estate sector is no stranger to technology. The industry is expected to continue adopting new tech in the coming years. Technologies that are expected to find applications in the sector include smart home tech, online home selling platforms, and apps. An uptick in the number of startups and high-technology companies servicing the sector is also on the horizon, with many paying close attention to making transactions faster.

Artificial intelligence is likewise expected to play a role in real estate with building organisation, design and management being eyed as potential areas of application. Also, machine learning is increasingly being used in public spaces concerning property design and urban planning. Even office space construction has been benefiting from AI use. Making matters even better is the fact that many property owners have been embracing the best facility management solutions to help them handle their properties.

The Smart Home

Property owners, landlords, and even builders are seeking to capitalise on amenities to attract new tenants. The staple gym and parking access, it seems, are no longer of critical importance as they are expected of most properties. Now, property owners are looking into offering unique amenities like communal gardens and movie theaters, among many others.

Smart homes are also making an entrance, courtesy of savvy real estate investors. Investors’push to provide amenities may very well signal the need to identify amenities that could have added value on their properties. They should likewise revisit their marketing strategies as amenities alone cannot attract tenants. All property offerings must be advertised while old tenants should know of any new amenities in the offing.

It is also essential to look at the cost of energy as its fluctuation can make the cost of producing building materials, transportation and construction either more expensive or more affordable.

On January 10, through the Kenya Gazette, the Energy and Petroleum Regulatory Authority announced that Kenyans would have to pay more for power as it increased the fuel energy cost charge and the water resource management authority levy. This cost will be passed down to the final buyer, thereby making housing units costly.

In summary, affordable housing, demand for modern office facilities and the steady growth of the retail sector will impact the real estate industry in the coming months as the sector remains a preferred investment option.


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