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Why Real Estate is Unlikely to See a Rise in Demand

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The government should consider reforming its land valuation policy due to a drop in real investment occasioned by over-valuation and economic effects caused by Covid-19 pandemic.

Real estate professionals and land economists are also in agreement that the country is unlikely to see a rise in demand.

Ken Gichinga, the chief economist at Mentoria Economics notes that even before the pandemic set in, Real estate was slowing down due to the oversupply of office units in some of the high-end suburbs in Nairobi and other major urban areas across the country.

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“The industry has suffered from what I called information asymmetry where one piece of land depending on who you speak to can go for such and such amount to remarkable differences. This is one area real estate marketers are looking at,” said Gichinga, as quoted by The East African.

The situation as in turn exposed real value of properties and now experts have issued a warning that there might be the need to re-evaluate the real estate sector by focusing on a review of valuation.

Accurate real estate valuations usually help investors make better decisions – on buying and selling properties but the current market variations in Kenya are unpredictable.

An eighth in one area can retail for as low as Ksh1.7 million and Ksh70 million in another.

“Rentals are still quite high. Demand has remained down in Kenya. Warehousing space demand has remained flat as the surplus remains high in all the three countries,’’ says Moses Lutalo, managing director, Broll Uganda.

Also Read: Baoriat Agencies App: Buying/Selling Land in Uasin Gishu Now Only a Mobile Click Away

Gichinga, a land economist notes that Covid-19 has introduced a new lifestyle with many people working from home while others have introduced new business.

For this reason, the desire for people to move into their own homes has also accelerated the slowdown in demand for houses.

Lack of professionalism in the sector is also one of the reasons why real estate is overvalued.

“We have never had an economic approach to valuation. When you talk about valuation, the big thing is supply and demand. We need to apply economic principles,” Gichinga said.

“The use of technology will help bring order and harmony. Once we are done with Covid-19, there is a need to digitize and harmonize the sector,” he added singling out Kenya’s digitization of the Land Registry is one that may lead to the proper valuation of real estate property by bringing down or stabilizing the cost of the property.

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