Why Kenyan real estate is a better investment than the stock market

Monarch Thika Road
Newly built apartments on Thika Road. PHOTO/FILE
The Kenyan real estate sector is the new money-maker for investors seeking to consistently grow their investments by double digits.

A new report by Nairobi-based investment company Cytonn shows investments in real estate have outperformed other asset classes in the past five years by generating returns of over 25 per cent annually.

This performance is more than double the 12 per cent that has been posted by traditional asset classes such as stocks and Treasury bonds.

According to Cytonn head of private equity real estate Shiv Arora, residential houses have generated an average price increase of ten per cent per annum in the past five years and an average capital appreciation of 19 per cent per year.

“The real estate sector growth has been fuelled by the entry of institutional investors who have been attracted by government policies that have created a conductive environment for real estate investment,” Mr Arora said during the release of the 2017 Cytonn Nairobi Metropolitan Area Land Report.

He credited the impressive performance to the rising population of the Kenyan middle class whose increasing purchasing power is leading to a greater demand for housing.

World-class shopping malls have also sprung up across Nairobi and other major towns as local and international retailers seek to tap into a growing middle class with rising disposable incomes and a limited choice of leisure activities.

READ: How to invest in the Nairobi Securities Exchange like a pro

Cytonn, which is currently undertaking Sh77 billion worth of property developments across the country, expects the real estate sector to continue growing on the back of low financing costs, sustainable high returns and a changing operational landscape as investors strive to meet the rising demand for housing.

The August 8 General Election is, however, expected to slow down transactions in the real estate sector in the second quarter of 2017 as developers and buyers “adopt a wait and see attitude”.

The depressed growth of the sector is likely to be reversed in the third and fourth quarters of the year since the polls are largely expected to be concluded peacefully.