Mr Kosta Kosta Kioleoglou, regional managing editor, Africa Plantation Capital. PHOTO| COURTESY
- During the financial cycle, capital flows affect prices, while the physical cycle (of demand and supply) determines vacancy, which then drive rents and values. (Kioleoglou Kosta)
Everyone gets into property investment with varied reasons and for an investor, it is to make as much money as possible, in the shortest period.
In Kenya, real estate is considered one of the safest investment options, with many rushing to cash in on the boom that has been experienced in the industry lately. Does this mean that the sector is immune to the highs and lows that are experienced in other segments of investment in the country?
Some experts posit that the level of security an investor enjoys from any investment is directly related to his or her knowledge of, and experience with the industry. They note that although property markets follow certain basic rules, each market has its own characteristics.
Africa Plantation Capital Regional MD Kosta Kioleoglu explains in an article that the property market has two cycles: financial and physical. During the financial cycle, capital flows affect prices, while the physical cycle (of demand and supply) determines vacancy, which then drive rents and values.
In terms of ‘favourable times’ of the year when a property is easy to dispose of, Vannesa Wanjiru, a real estate agent, says that the period between June and September is the best time for an investor to put up his property for sale, because it represents the period when property moves fastest.
“We have two seasons, from mid-January to mid-April and then June-September. The two periods would be a good time to put up your property for sale, although this does not necessarily mean that they will fetch higher prices compared to other months,” .
The reason why the October period may not favor the seller, she says is that around this period, people tend to start thinking of the festive period, which changes their focus.
The same can be said for early January when people are organizing themselves for the year ahead, paying bills and setting their goals. After mid-April, potential buyers are thinking about the Easter holiday.
However, some real estate experts say that as much as it might seem strange, the month of December presents investors looking to sell their properties with the best opportunity to capture the attention of prospective buyers.
They argue that property put on the market on Christmas Eve would be fresh stock, and would generate enormous interest because the week after Christmas sees families come together to consider plans for the New Year. Most decisions are often made about a fresh start or what is new to invest in, something that may include moving homes or buying property.
Wanjiru agrees with them to an extent saying, “It could be true because people get their bonuses around this time, but it cannot give you what you get in the middle of the year between June and September.”
More than demand and supply
Reginald Okumu, a director at Ark Consultants Ltd, a real estate and property valuation company, believes that the narrative that there are peak and off-peak periods is neither here nor there. Kenya’s economy has outgrown such basic reasoning of demand and supply dynamics.
He insists that the key to demand-supply drive is buyers’ income and the state of supply. When the latter has decreased while there is an increase in the former, it means that potential buyers can easily access credit because their income has increased.
He adds that buying a property, unlike impulse buying where one can wake up and buy a certain item requires planning. “If you plan to buy a house in January, then you will buy it that month whether you are paying school fees or not.” He says “anytime is a good time”, but everything depends on what you intend to achieve. The seller’s aim is to get the best price possible.
The director, nonetheless, states that there are some months with more sales than others, noting low sales between the months of January and February, building up towards the middle of the year, before tipping off towards the end of the year.
“For the seller, the best time would be when the economy is booming and buyers are able to access credit, and supply is low. The period is known as ‘the sellers’ market’ — when prospective buyers have money and the properties available are few” he notes.
The real estate expert further states that ‘a sellers’ market’ is difficult to predict, for “although we say markets have cycles, they are never precise. Nobody sits down and decides that today we are going to release only 10 houses to the market. The market is broad and people are making independent decisions wherever they are.
However, it can be recognised through keeping supply and demand data, but the easiest way to tell is when you start seeing prices going up. This means that there is definitely a push towards purchase. Either the market is sensing supply or buyers are sensing a likelihood for appreciation in property prices, so they are buying ahead of time,”
Mr Okumu further explains that if a seller wants to sell his or her property as fast as possible, then he may not attract the maximum price for it because the objective of getting the best price possible is overridden by the desire to dispose of it quickly.
“This time would be when you are selling because you have financial commitments like paying school fees, or offsetting medical bills, or in need of capital for a new venture. For example, huge sales may be during December for those taking children to schools in the country, in January, or between June and July, for those taking their children to schools abroad,” Mr Okumu points out.
Source : Daily Nation
By COLLINS OMULO