A report by HassConsult, which is the only property index provider in Kenya, states that Kenyan housing prices have largely remained stable even as the global economy struggled and the country experienced political turmoil at home.
Residential housing in particular, has been a very good investment even in hard currency terms, and while house prices and rentals have stabilised, prices seem poised to grow steadily as the Kenyan economy rebounds. In the first quarter of 2010, average prices rose 18% from the final quarter of 2009. The second quarter of 2010 has seen growth in prices of 0.5%.
On the back of solid economic growth and the creation of a more affluent middle class, cement sales have risen strongly over the past few years, as both developers and individuals constructed residential and commercial properties. The development of the local mortgage market has also provided a leg up to the increased demand.
Kestrel Capital, in a cement sector research report, notes that Kenya’s cement demand grew at a compound annual growth rate of 12.9% between 2003 and 2008. Uganda and Tanzania have also experienced this increased demand, as the East African region as a whole has experienced growth, the result of which has seen many of the region’s cement companies – Kenya’s Athi River Mining, Tororo Cement (trading as Mombasa Cement in Kenya) and Hima (owned by Lafarge) in Uganda, as well as Tanzania’s Tanga and Tanzania Portland Cement (producers of Twiga cement) – looking to invest in increased capacity.
Perhaps in acknowledgment of these developments, Kenya’s listed investment company, Centum Investment, has just announced that it expects to triple its assets under management by 2014 to at least Ksh.30 billion (US$350 million), with a focus on private equity, and real estate in East Africa. With just Ksh.100 million in real estate assets at the moment, the target is to raise these to Ksh.6 billion in the period to 2014.
Though not particularly cheap at just over 1.5x NAV, the company’s foray beyond its borders should see it yield enhanced returns going forward, and we believe it could yet prove a solid real estate/infrastructure play for the region should valuations become attractive.
Article produced by the Imara Africa Securities team. Imara is an investment banking and asset management group renowned for its knowledge of African markets.