Holiday Homes Next Big Business in Kenya
Holiday homes are emerging as huge business in Kenya, with buyers targeting capital appreciation and short-stay rental income when not occupying the houses. Real estate developers say demand has been triggered by a changing middle-class lifestyle, and demand from the diaspora and foreign buyers.
The middle-class, mostly second home buyers, and Kenyans in the diaspora are buying with intention of eventually using them as alternative retirement homes. The property niche is emerging in key tourist destinations across the country, from the coast to Rift Valley and around Mt Kenya.
“The holiday home concept has been established slowly over the last 10 years. People have changed their lifestyles and attitude by integrating holidays and leisure,” said Lee Karuri, a former Architectural Association of Kenya chairman, who is developing a leisure and golf resort city.
“People used to put up their second homes back at their rural areas, but the idea of a holiday home has evolved to a planned community in a country setting,” he said. His development, dubbed Longonot Gate, sits on 2,400 acres at the foot of Mt Longonot promising ease of access to national parks, Naivasha and Elementaita lakes, and the Aberdare Ranges.
The serviced plots are priced at Sh4 million per half-acre, with the whole development expected to gobble up an estimated Sh85 billion in investments by time of completion. In another development christened The Village, in Malindi, the developer, Baobab Development Group, is offering both sole and fractional ownership of fully furnished, serviced and managed apartments.
The 33 units of one- and two-bedroom townhouses sitting on 5.4 acres are priced at Sh12.7 million and Sh17.7 million respectively, with an offer for fractional ownership starting from Sh1.3 million. The Village will be ready for occupation at the end of September. Three-bedroom units – which were only six – have been sold out, signalling demand for larger units for families.
The developer has another project in the pipeline in Diani and promises regular rental yields of up to 11.5 per cent a year and up to 21 per cent annual appreciation in capital for investors in the luxury properties. “The rooms can earn between Sh15,000 and Sh25,000 per night, or even higher, depending on tourist season and demand,” said Ruth Gathua, a sales representative for Baobab.
At EnglishPoint Marina – a waterfront development of 96 units and a fully serviced marina – Sh36 million is the entry-level price for a Type 3 apartment (ground floor, back side of the blocks). Since the project was announced in 2010, land prices at EnglishPoint area in the North Coast have shot up significantly as other developments spring up.
“Our priority was the domestic market where sale is off-plan unlike foreign buyers who usually wait for the finished product. We have sold 50-60 per cent of the units mostly to local buyers... prices of the finished product will be determined by the market,” said Emmanuel Musyoka, the project’s chief accountant.
Munene Thuranira, head of sales at Mombasa-based MySpace Properties, says holiday home buyers can expect an average of 60 per cent occupancy rate throughout the year because most clients are short-stay. “We are seeing most buyers furnishing their units in readiness for short-stay rentals. Returns vary depending on the season.”
Thuranira said in February and March, the low season, may fetch as little as Sh8,000-10,000 a night while peak season – August to January – can fetch as much as Sh25,000-30,000 per night. MySpace Properties has several developments, with three-bedroom apartments at MillView in Shanzu priced at Sh12.5 million. One-bedroom apartments at its Emerald Beach Apartments at Shanzu beach are priced at Sh15.5 million, while four-bedroom and three-bedroom apartments at One Twiga and Pearl Residents in Nyali are priced at Sh22 million and Sh20 million respectively.
“We are targeting both the domestic market and foreign buyers,” said Thuranira. But make no mistake. With several developments set for completion in a year, analysts say there’s likelihood of a glut in the segment, which may yet leave some developers with unmoving stocks. “Holiday homes are big business in Kenya, I’m surprised there hasn’t been more of it in the past,” said Nathan Luesby, managing director of property classifieds website Property Leo.
“Kenya has amazing coastlines and fantastic tourist sites where to own a second home, and a middle-class that is expanding into holiday homes,” said Luesby, adding that some developers have sold quickly while others haven’t. “It’s a huge market, and given that most international travellers stay in hotels, there’s need to market this type of accommodation out there.
Self-catered rooms are relatively cheaper than hotels and this perception need be felt.” The main concern for now is the impending oversupply of similar developments, but the segment looks good in the long term. “It can be a sensible investment if well done, and buyers are well placed to take advantage at the moment,” Luesby said.