Twisted steel price for D8 reinforcement bar was kes 400 in 2014. Current[2021] price for the same D8 is kes 550.
This represents a 37.5% increase for the last 7 years, around 5% increase per year.
Mabati.
Steel roofing mabati sheet prices for gauge 32 , 2meter long , was selling at kes 400 in 2014. Current price[2021] is kes 680. This represents a 70% increase during the last 7 years, working out to a 10% annual increase.
These increases are in tandem with Kenya’s inflation rate of between 5 to 10% per year.
The last 1 years has had a higher inflation rate due to effects of COVID 19 on the global economic environment.
Last year[2020], inflation rate in Kenya rose to circa 6% from lows of 4% in previous years and has now stabilised to 5.7% currently. Source https://www.centralbank.go.ke/inflation-rates/
Construction cost.
Construction costs will also follow the same rates in increase. The cost estimates for low cost housing 7 years ago are now obsolete. The cost estimates for high class housing 7 years ago are now for middle class housing. The cost estimation for middle class housing is now for low cost housing.
The rate of inflation helps to give a good estimation of what cost of construction will be like in the coming years.
How investors are enticed back into real estate developments
Real estate projects in Kenya have for the last few years witnessed scenarios where investors have lost their hard earned cash in property deals tat did not materialize as envisaged.
Humans have a nesting and homing instinct. Humans produce hormone estradiol, which, among other things, results in an uncommonly strong desire to organize and clean. Humans are territorial animals, with deep desires to mark and protect our territories. Every human being desires a home, hence amidst all the litigation happening in Real estate projects in Kenya, Kenyans still re demanding for houses. The negative publicity has not dented Kenyans’ need for land and housing.
Abraham Maslows hierarchy of human needs puts Shelter at the bottom, meaning that housing will always be in demand no matter the situations happening. No matter how many scandals appear on Kenyan real estate scene, Kenyans will always find different permutations and combinations to access housing for themselves.
Driving force of crowdfunding in real estate development. Investor decision dependence on crowdfunding initiatives
Crowdfunding is a method of real estate finance and development whereby land owner attracts investors who put in small fractions of the total whole project. This enables investors to own prime real estate without breaking the bank, literally. This financing method keeps banks and their high interest rates away from projects directly. Banks can play by financing individual investors with personal loans. In other projects, banks finance land owners with construction loans which are quite tedious in needed paper work and risky in case of default.
The ease of investment since the huge total construction cost is divided into small parts where many investors can afford, makes crowdfunding very marketable in Kenya.
‘Sponsor’ or ‘operator,’ reputation impact on the crowdfunding investment in real estate development.
The crowdfunding sponsor needs to be of impeccable reputation so as to enable investors feel confident to invest through them.
Consumer protection laws in Africa are generally very weak. Also, some unscrupulous real estate investors take advantage of the fact that neo colonization in Africa is still present , hence many Africans trusting projects that seem to be sponsored by Caucasians . Some have used this as a bait to fraud Africans eg in Ivory Coast.
In the recent case of Cytonn, it was evident that alot of investors usually don’t read the fine print before putting their money on the stake.
Impact of crowdfunding initiatives in the marketing of real estate developments growth.Attitudes of the crowdfunding promoters in the real estate developments.
Crowdfunding will enable many more people participate in real estate. Before crowdfunding, only a few rich peole who could amass the hundreds of millions needed to invest in prime properties could play the real estate field in Kenya. With crowdfunding, the huge real estate projects are cut into smaller portions which are within financial reach of many Kenyans. This will impact on Kenyan real estate with most prime properties in urban areas of Kenya finding access to capital easier. Land buying into far off hinterlands which was a common way for investors to play into real estate will slowly give way to much better methods such as crowdfunding which have better and higher return on investments.
Sale price then was USD 140,000, approximately KES 14million.
Current sale price of the 2 bedroomed unit is approximately usd 600,000, kes 60,000,000
This works out to around 10% price appreciation per annum from 1981 to 2021.
In Kenya, land appreciate at around 20% per annum.
Apartment appreciation rate in Kenya is much slower. Apartments that sold for kes 15m in Kileleshwa 5 years ago are still selling for same amount, meaning zero or minimum appreciation rate.
A similar sized beach apartment in Diani for example, costs approximately kes 20,000,000, 3 times lower than the Miami one at kes 60m.
Developer.
The Miami condominium apartments were developed by Nathan Reiber. He was born in Poland, migrated to Canada then USA . Architectural designs were done in the late 1970s.
Nathan Reiber served as the Assistant Vice President for the Jewish Institute of National Security Affairs . He died on 1st July 2014.
The Miami Champlain towers building was constructed in 1981, making it 40 years old. Its next to the ocean, front row. This proximity to the ocean means that the air and moisture around it has elements of salt within it. Salt accelerates steel reinforcement corrosion. This corrosion reduces the size of the steel diameter and also reduces the grip of the steel reinforcement on the concrete surrounding it.
Steel Rebar.
This reduction in size of rusted steel and loss of grip is especially very dangerous on the columns that support the building’s weight, especially the columns in the lower part of the building, foundation and 1st floor.
basement.
The Champlain building had a basement parking where the columns had visible rusting and concrete cancer on the lower parts. A recent structural engineering report had recommended repair of the affected columns but was not effected.
Sale value.
The 3 bedroomed apartments were valued at kes 100,000,000 per unit. The owners had an association where they managed the affairs of the building block such as repairs . The management had in 2020 contracted Engineer Frank Morabito to check on the structural viability of the building.
Management.
Condominium apartments usually have problems with management unlike rental apartments where there is only 1 owner so information flow is easily acted on. In condominium sale apartment situations, the board is elected from the owners hence abit slow in acting on issues. In the Miami case, after the structural engineer gave out his report, the management board took long to act on the issues raised until the building collapsed.
Kenyan Coast.
Apartment ownership in Kenya is on the increase around the city, Kilimani, Upper Hill areas and around the Kenyan coast, Watamu, Diani, Mombasa areas. This Miami building collapse case should be a wake up call to apartment building owners to ensure that their building blocks are regularly checked by structural engineers and action is promptly taken to repair any issues raises especially for the apartments around the coast, Mombasa, Diani, Shanzu, Watamu etc.
