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- August 24, 2023
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Factors that Influence Real Estate Property Prices in Kenya
In Kenya, just as in many other societies, real estate investments are essential for wealth creation. Ownership of real estate properties brings a sense of social and political power which are mostly determined by the size of the property under one’s custody. As you search for property, you will notice that they tend to vary in price and at times the same type and size of house may be valued differently.
Below are some factors that influence the pricing of properties in Kenya:
Location
Today’s real estate investors are looking for homes that offer convenience and accessibility in addition to comfort and security. The location of a property significantly influences its value and desirability.
Location can be used to determine the value, which is the measure of worth based on the future benefits anticipated to accrue, therefore determining the pricing of the property. Land and houses that are in prime locations, areas that highly attract both developers and investors such as beach houses due to their proximity to the ocean and sandy beaches or wealthy neighborhoods like Runda and Kitisuru that attract the affluent, may go at a higher price compared to other locations. Additionally, Properties that are close to key amenities such as shopping malls, schools, public transportation, and hospitals are viewed to be of a higher value and therefore sold at a higher price. Urban areas tend to draw a large population, increasing the demand for properties thus driving up prices as a result of intense competition for properties that may be scarce.
Macro-economic environment
The overall state of the economy affects different sectors including the real estate market. Depending on the state of the economy, the pricing of different products in the real estate sector will vary. Employment rates, income levels, and interest rates affect property prices through shifts in demand for properties leading to higher or lower prices. Limited supply with high demand leads to an increase in prices. Further, when the interest rates for mortgages are high, it causes a reduction in demand for houses leading to a decrease in real estate prices and vice versa. A strong and growing economy tends to drive property prices up as people have higher purchasing power.
Infrastructure
Infrastructure systems and facilities operate as the basis for a country’s economic growth. The development of infrastructure in an area influences the price of real estate properties. Availability of electricity, water, telecommunication services (internet connectivity and broadband access), and other utilities affect pricing since it makes the area attractive to live in, increasing demand for properties, the average property value alongside quality of life in such areas thus leading to an increase in prices.
Government policies
The government comes up with policies and legislation on property taxes, deductions, land-use regulations, and subsidies that affect the price of land or property sold by real estate companies. Changes in these policies and regulations can affect property prices. For example, if the government decides to increase taxes like capital gains tax on real estate properties, this will likely lead to higher property prices and slow growth in the real estate sector. This is due to a possible decrease in the transfer of properties, therefore less supply with high demand.
Type of property
Though some developers may value houses of the same size differently, the size and type of a property has a significant influence on how much it will sell for. It goes without saying that a three-bedroom house will go for a higher price compared to a one-bedroom house in the same area. In the same manner, a studio apartment would be sold at a different price compared to a loft. The size of the compound that the home occupies may also affect the pricing whereby a children’s playground around the home may be valued more than an extra room.
As a potential real estate buyer or investor, it is wise to be aware of these factors as you make your investment decisions. Additionally, consulting real estate experts such as Safaricom Investment Cooperative, who have taken time to analyse locations and select places, can help in providing valuable insights into the specific market dynamics in Kenya.
To get in touch with SIC, visit: https://sic.co.ke/
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