Inside Politics

Detached units are the next smart investment frontier

Friday, August 7th, 2020 00:00 |
Peter Wangai, CEO, Goldenscape. Photo/PD/Miliam Murigi

Stand alone residential properties that offer more privacy, access to outdoor space and less congestion are becoming more attractive to home owners keen on minimising physical interactions as a safety precaution during the current health crisis.

With the outbreak of coronavirus and subsequent advise to stay-at-home, we have all been forced to spend unusually longer hours in the house.

Given the limited options of places to escape to, we are now forced to come to terms with the quality of spaces we live in. 

 This has seen many Kenyans rethinking their lifestyle. According to Peter Wangai, Chief Executive Officer, Silverstone Properties, Covid -19 pandemic has led to high demand for detached units in both high-end and low-end areas as buyers and renters seek more square footage, privacy, and autonomy in the wake of the coronavirus pandemic.

According to Wangai, apartments in central, densely populated urban areas are losing their appeal as residents are subject to building restrictions and have higher risk of exposure to the virus.

“The desire for space and privacy and for control over who comes and goes from one’s home is stronger than ever, making detached units a smart investment now,” says Wangai. 

Rising demand 

However, he adds that, though demand for detached units is growing, apartment living has not lost its luster entirely.

High-end, fully-serviced apartments that go the extra mile to protect residents are still appealing to buyers.

“People love full-service living, and there will be new measures put into place by these developments for those people,” says Wangai.

Cytonn Research Analyst Wa. Photo/PD/Miliam Murigi

He adds that investing in detached units within the cities and their outskirts could lead to good returns.

This is because in the wake of the pandemic, urban-dwelling millennials are expected to start looking for more square footage in the suburbs and are more likely to rent than buy, presenting opportunities for investors to earn rental income.

A recent report by Cytonn Real Estate dubbed a Buyer’s Market amidst A Global Crisis revealed, that due to Covid-19 pandemic there is a possibility for detached units such as bungalows in the lower mid-end areas attracting more interest from buyers.

This is because of the relatively good infrastructure and their proximity to key commercial nodes thus boosting demand for homebuyers.

According to the report areas such as Runda Mumwe, Ridgeways and Ruiru have been recording the highest price appreciation and annual returns for detached units because of the relatively low supply coupled by presence of good infrastructure, amenities as well as proximity to high-end areas.

When releasing the report, Cytonn Real Estate’s research analyst, that reviews emerging trends between July 2019 and July 2020, Wacu Mbugua said that though apartments continue to perform better, they expect to see detached units in the lower mid-end areas attract more interest from buyers.

Apartments registered average total returns of 5.3 per cent, compared to detached units at 4.6 per cent as well as higher uptake and occupancy, which averaged at 19.4 per cent and  86.3 per cent respectively,

 “Runda Mumwe and Ruiru present the best opportunity for detached units driven by relatively high returns of 5.5 per cent and 5.8 per cent, respectively.

This is in comparison to the detached market average of 4.6 per cent, and relatively higher annual uptake of 24.1 per cent and 20.6 per cent respectively,” reads the report.

Strategic investments

Wangai adds that, rather than investing blindly investors, should consider some of the property features that will be in demand, given the way coronavirus pandemic has altered Kenyans way of living and working.

Outdoor space, for instance, will be a more appealing feature than ever, and having a dedicated office for working from home will be a top priority.

Investors should also look closely at properties in gated communities, where the sense of greater security will be attractive to buyers.

“Private outdoor space whether for the apartment or detached unit is going to be perceived as a greater luxury.

This is because such space enables one have the peace of mind knowing that no one will violate social distancing orders,” adds Wangai.

According to him, before the coronavirus outbreak, demand for detached units was already high and the current pause on much of the buying and selling of houses in the country will lead to a spike in demand post Covid-19.

“The market has a pent up demand already due to the decline in disposable incomes.

Developers are expected to focus on low-cost housing in the lower mid-end segment as well as modern-day concepts such as live-work-play controlled communities for the upper mid-end markets, with investors likely to pick on investment strategies such as off-plan sales and joint venture deals in the niche markets in order to realise higher returns,” reads part of the Cytonn report.

According to Wacu, factors such as an attractive demographic profile with a relatively high population growth and urbanisation rate, access to affordable mortgages such as from Kenya Mortgage Refinance Company Plc (KMRC), which is slated to begin lending in Q3’2020, the huge housing deficit, which is expected to grow even further given the current economic downturn and the subsequent dent on household incomes are some of the factors that are expected to continue shaping demand in the residential sector.

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