Wazua
»
Investor
»
Property
»
The Housing Bubble in Kenya will Burst very soon....
Rank: Member Joined: 11/6/2006 Posts: 276
|
@bwenyenye- i think the share of buy-to-let and owner occupier.. is 50-50 at list from some projects whose records i have..
the ratio could be 25%-75% as you go upmarket.. but on a project of around 4M per unit the ratios are reversed..
|
|
|
Rank: Member Joined: 1/24/2011 Posts: 407 Location: Nairobi,Kenya
|
The thought that the housing bubble in Kenya will burst soon is not realistic.You mean to say that a house in Langata currently selling at 13.5M will reduce to 8.5M.  ,I highly doubt...Probably the rate at which prices are increasing will reduce. Hope is not a strategy
|
|
|
Rank: Member Joined: 11/6/2006 Posts: 276
|
there are so many housing projects.. no one would overprice their property in the face of stiff competition..
and no.. the developers did not go for a conference and agree.. 'let us all overprice our houses'.. no memo either has been sent around..
the sale price of a house it determined by the cost of inputs..
- land cost
- construction cost
- cost of borrowing
- other misc cost...
the land costs have been growing in only one direction
the cost of construction is largely determined by crude oil... which also grows in one direction..
for the risk of undertaking the project.. the developers have to charge an amount to compensate the opportunity cost of funds.. otherwise they should have sold their plot and invested the money in the equity markets..
|
|
|
Rank: Elder Joined: 6/19/2008 Posts: 4,268
|
fantony wrote:there are so many housing projects.. no one would overprice their property in the face of stiff competition..
and no.. the developers did not go for a conference and agree.. 'let us all overprice our houses'.. no memo either has been sent around..
the sale price of a house it determined by the cost of inputs..
- land cost
- construction cost
- cost of borrowing
- other misc cost...
the land costs have been growing in only one direction
the cost of construction is largely determined by crude oil... which also grows in one direction..
for the risk of undertaking the project.. the developers have to charge an amount to compensate the opportunity cost of funds.. otherwise they should have sold their plot and invested the money in the equity markets..
but am sure you agree that over 100% profit margin is unrealistic..... I really would want to believe all those who think that the cost of houses in Kenya is realistic.... with its poor finishing and prices from jupiter.... check out houses in other countries and compare with what you are being offered... then you will know you are being ripped off... A colleague of mine moved to Harare last month... the house she got is a 4 bedroomed house, with a two bedroom guest house, swimming pool, electric gate, up market, stand alone house... - owner asking US$80K - sale!!!! rent is US$1K per month.... where in kenya would you get that! The sell copper... not oil. If you said tax factor raises the cost, it would make abit of sense..... check out SA houses..... see the amenities available, see the finishing and compare that with the cost.... an 8m house in SA is jaw dropping... and here? an old house tacked in Imara daima if you are lucky!
|
|
|
Rank: Member Joined: 9/25/2007 Posts: 96
|
@Wendz Can your friend get me a similar house? I would like to buy one. Email: Global_v1@yahoo.com.
|
|
|
Rank: New-farer Joined: 6/3/2010 Posts: 96
|
[/quote]
but am sure you agree that over 100% profit margin is unrealistic.....
I really would want to believe all those who think that the cost of houses in Kenya is realistic.... with its poor finishing and prices from jupiter.... check out houses in other countries and compare with what you are being offered... then you will know you are being ripped off...
A colleague of mine moved to Harare last month... the house she got is a 4 bedroomed house, with a two bedroom guest house, swimming pool, electric gate, up market, stand alone house... - owner asking US$80K - sale!!!! rent is US$1K per month.... where in kenya would you get that! The sell copper... not oil. If you said tax factor raises the cost, it would make abit of sense..... check out SA houses..... see the amenities available, see the finishing and compare that with the cost.... an 8m house in SA is jaw dropping... and here? an old house tacked in Imara daima if you are lucky!
[/quote]
Wendz, the difference between Kenya and SA is the infrastructure available...because of the good roads and proper urban planning, not everyone is clamouring to live in the same neighbourhoods as nairobi...jorburg with roughly same population as nrb has expansive surburbs covering areas as large as kitengala to thika with all those people commuting because of the excellent road networks
because of this, the choice available is incredible, developed land is very cheap...qtr an acre with tarmac frontage is nothing special..costs like 50k rands which is half an million, and the equivalent in nairobi which would be Thika road fronting highway costs 3-4m just because of the limited choice.
In case proper infrastructure was available all across nairobi not just in the west of uhuru highway then housing would not be that expensive...
as long as infrastructure remains a challenge (think of the fact that upto now, no single metre of tarmac exists in syokimau) then choices of prime land will be limited = high land prices + relatively higher housing cost driven by limited supply in decently serviced areas
|
|
|
Rank: Member Joined: 11/6/2006 Posts: 276
|
@wendz - 100%... where..
let us first be clear... since you are neither bill gates nor william kabogo you are not going to buy a house in a day.. you will consume a house for a lifetime.. why do you want to buy it in a shopping basket like you would with bread..
i'll refer to the half acre plot in kilimani or kile or westi or parklands
that goes for 50M - blame the market...
that plot will legally fit in 16 apartments of 180 sq metres each
the construction cost of that is 16 x 180 x39,000 = 112,320,000
add professional fees of 10% (Arch, QS, civil/struc eng, mech/elec eng) = 11,232,000
new total = 123,552,000
the developer will probably borrow 70% of this i.e. debt = 74,131,200 at 14% interest hence new cost 10,378,368
new total = 133,930,368
add the land value 50,000,000
approx project cost = 183,930,368
cost per flat = 11,495,648 add 25% for a profit.. project will probably take 2 year hence this is a yield of 12.5% p.a.
a flat minimum sale price of 14,369,560.
and that is how syokimau, kamulu and kitengela were concieved
|
|
|
Rank: Veteran Joined: 4/16/2010 Posts: 906 Location: Nairobi
|
@wendz I think that is the appropriate view of things. The basic issue is that people are just not getting their money's worth when buying these houses, and will eventually stop paying over the top for low value.
You wonder sometimes what people are buying with these crazy valuations. Security? No. My friend just came out of treatment for a skull injury sustained when accosted by thugs close to his Westlands home, and my friends who live in Runda and Karen always tell me to drive like the wind when coming out of their place late. Access to job opportunities? No, Kenya is not structured like USA or SA where just living in a certain area opens up opportunities. Beauty Rates? I can't think of any spectacular landscapes in the high-end areas, but I could be wrong. Point is, these hefty valuations seem based on hype more than value, so there's every chance the pricing is just wrong to begin with
|
|
|
Rank: Hello Joined: 3/5/2011 Posts: 1
|
The current housing market in kenya seems to following the suit of USA housing markets.I feel buyers are not getting the value of money for the house they buy.Think prices will go down further.
|
|
|
Rank: Member Joined: 4/7/2010 Posts: 130
|
Interesting discussion. Sadly, most of this is mere speculation. Those clued in the industry know what's going on.....a bubble is 20years away!!
|
|
|
Wazua
»
Investor
»
Property
»
The Housing Bubble in Kenya will Burst very soon....
Forum Jump
You cannot post new topics in this forum.
You cannot reply to topics in this forum.
You cannot delete your posts in this forum.
You cannot edit your posts in this forum.
You cannot create polls in this forum.
You cannot vote in polls in this forum.
|