Oh Yes!

The property market is exciting again after signs of steady growth. More investors are entering the market, focusing their investments on commercial buildings and residential properties. Aside from these two major groups, there is also an exciting market segment shaping up to be very interesting: the rental property market.

Investing in a holiday home can be a great addition to your portfolio. There are high prices, a long list of locations to choose from, and other advantages, which you will quickly discover as you venture into this particular investment opportunity, which makes the market even more attractive.

A Growing Demand

The simple answer to that question is YES. As the travel industry grows, the demand for more holiday rentals in or near beautiful holiday destinations grows alongside it. This increasing demand sparks a slow but steady price hike, which means there is more income potential to expect from an investment in a holiday home.

The growing demand for holiday rentals also means a higher occupancy rate. In the rental property market, the most significant expense is owning a rental property that stays empty for an extended period since you’ll still have to pay for insurance and maintenance, as well as cover other costs of ownership (i.e., the mortgage payments).

High occupancy rates turn a rental property investment into a relatively safe one. The current demand even outweighs the available supplies in prime locations such as Malta and Gozo. This was a major takeaway from an interview I had with Alex, director at luxuryvillasmalta.com.

Access to Opportunities

Investing in a holiday home is just the first step, thanks to the internet and the many platforms available today, you can quickly reach the right target tenants through online booking sites and apps.

You can also make the investment easier to manage by working with a property management firm. The firm will take care of everything for you, from creating a good marketing kit for the property to accepting payments and maintaining the property.

The more significant access to opportunities to earn revenue from the holiday home breaks down any remaining entry barrier to this investment. You no longer have to absorb risks such not being able to reach the right potential customers or difficulties in managing properties in different locations. There are resources to help you tackle those challenges without hassle.

Capital Gain

Similar to investing in other properties, spending in a holiday home also allows you to enjoy a healthy gain on your investment in the long run. The world’s property market may still be in recovery after the last major crisis in 2008, but that’s a great thing for investors.

Right now, the market for holiday homes offers excellent prices and high potential gains. If you are not happy with the market or the way the investment is going, the growing demand for rental properties also means you can find a suitable buyer and capitalize on the gain in value at any point in your investment.

That brings us to our initial question. Is it wise to invest in a holiday home? Based on the opportunities we have discussed in this article and other market factors, investing in a holiday home is one of the best ways you can strengthen your investment portfolio today. And there is no better time to enter the market than today.

Find an investment opportunity that suits you personally and start capitalizing on all of the opportunities we have today.

Guest Bio

Elena is an experienced investor and a writer for luxuryvillasmalta.com. She regularly coaches new investors and loves to share her thoughts and experience in the property market, especially rental property investments.Boat-house-cottage

 

According to the Kenya National Bureau of Statistics (KNBS), the value of building plans approved by Nairobi City County in 2017 between January and May went down to Sh105.6 billion from Sh126.3 billion in a similar period last year. However, many expect that the pace will pick up once election-related activities end.

Kenya’s real estate and construction market has seen growth in the last 7-years, with its contribution to the Gross Domestic Product (GDP) increasing from 12.6% in 2010 to 13.6% in 2016.  According to the Kenya Bankers Association report in quarter 3, of 2017, there was a rise in housing prices by 0.4% as compared to 1.0% increase in quarter 2, 2017.

The rebounding of the industry means that investors should take a sharp note over issues such as; housing prices, falling of building material prices, employment opportunities and more importantly, county governments who will be looking forward to fulfilling their election pledges. Those, therefore, planning to invest should be upbeat.

At Jumia House, we have helped in outlining a few opportunities to look out for if you are planning to invest in real estate sector in 2018:

  1. Fair prices for construction materials.

For the last six years since 2010, cement consumption has been on the rise. An increase in construction activities like the boost from the Standard Gauge Railway (SGR) construction has mostly contributed to the increasing demand. According to KNBS, by March 2016, consumption had increased by 33 percent which was equivalent to a 1.4m tonnes increase. This rise means that with more construction activities expected in the real estate and construction sector, the prices are poised to soften further.

This statistic is an indication that there will be an opportunity for growth in the construction industry, thus, if indeed it will impact on prices, investors in the real estate’s housing and construction sector should brace for more opportunities.

  1. Tax waiver considerations

Real estate is a primary source of income of tax revenue in the form of land rates and other tenancy remittances. Before investing in real estate, some tax obligations have to be met to get consent, many land and property owners owe county governments tax. When they issue waivers, real estate investors should take full advantage of the incentive.

  1. Infrastructure tenders

Compliance among contractors has been encouraging in the year 2017. Almost all registered contractors have renewed their licenses with the construction authority. The high rate of compliance level is a suggestion of a positive year ahead since they lock out projects of those who do not comply with industry requirements.

  1. Industry statistics point to good fortunes ahead.

The disbursement of funds from the Roads Maintenance Levy Fund by Kenya Roads Board to various road agencies and county governments offers a new ray of hope for the contractors. The levy is at Sh40.9 billion up from the initial Sh25.4 billion. As a result of increased activity in the construction of roads, and housing development translates into an increase in employment opportunities, tenders, and tremendous industry boost.

Overall expenditure on roads is expected to increase by 38.3 percent from Sh113.2 billion to Sh156.5 billion, according to KNBS, with total development expenditure also expected to grow by 31.7 percent from Sh87.8 billion in 2015/16 to Sh115.6 billion.

  1. Housing Boom

The Kenyan government unveiled an ambitious plan to build a million units of public rental housing in the next five years to curb the emergence of informal settlements and provide decent housing for low-income earners. This plan is high on the agenda of the State Department of Housing and Urban Development who are looking for developers to build 8,000 houses on a 55-acre plot that has been set aside by the government in Mavoko, Machakos County.

In the same line, National Housing Corporation (NHC) also announced its plans to develop 6,000 house units across eight counties, in the next three years.

  1. New jobs on the cards

The argument that real estate stakeholders have is that there is a drop in job creation in the construction sector owing to the slowdown in the works of the SGR, which has been a considerable source of employment opportunity for the industry. However, full recovery of the housing market is dependent on more jobs, and better wages are driving household formation and homeownership.

Skills workers obtain from the construction of the SGR are expected to come in handy, especially in the area of civil works. An increase in the building of roads and development of housing last year is reported to have contributed to a rise in employment in the sector from 148,600 jobs in 2015 to 163,000 employment opportunities in 2016 and expected to rise in 2018.

  1. Hospitality industry

According to Central Bank of Kenya’s Economic Outlook report, in the run-up to 2017 election, the best performer in the first quarter of 2017 was tourism, registering a growth of 15.8 percent compared to 10.4 percent during the first quarter of 2016. Furnished apartments have become popular among tourists.

Tourist arrivals went up from 317,024 in the first three months of 2016 to 326,875 in the first quarter of 2017, while hotel bed occupancy grew from 1,937,007 in the first quarter of 2016 to 2,115,732 beds in the first quarter of 2017. This influx of tourist numbers increases demand for both hotel space bookings and furnished apartments in tourism hotspots.

Client getting real estate advice                                                                    Client getting real estate advice

The road to homeownership can be a bumpy ride, often filled with unexpected turns and detours. It, therefore, makes sense to have a real estate pro help guide the way, we would recommend Ujenziplan a Real estate Agency based in Westlands Kenya that deals with Renting, Selling and Managing of property.

While real estate websites and mobile apps can help you identify houses you may be interested in, an experienced agent does so much more, such as:

1 Guide.

Before you tour your first home, your agent will take time to learn more about your wants, needs, preferences, budget and motivation. A good real estate agent will help you narrow your search and identify your priorities.

 2 Educate.

You should expect your agent to provide data on the local home market and comparable sales. The home-buying process can be complicated. A good agent will explain the steps involved – in a manner that makes them understandable – and provide counsel along the way.

3 Network.

An agent who is familiar with your target neighborhoods will often know about homes that are for sale – even before they’re officially listed. Experienced agents tend to know other agents in the area and have a good working relationship with them; this can lead to smooth transactions. Your agent may also be able to refer you to trusted professionals including lenders, home inspectors and contractors.

4 Advocate.

That means you have an expert who is looking out for your best financial interests, an expert who’s contractually bound to do everything in their power to protect you. ‘If you find yourself in a situation where the same agent represents both the buyer and seller, things can get trickier” says Paul Nyamueya a Real Estate Consultant, who works for Ujenziplan.

 5 Negotiate.

Your agent will handle the details of the negotiation process, including the preparation of all necessary offers and counteroffer forms. Once your inspection gets completed, the agent can also help you negotiate for repairs. Even the most reasonable consumers can become distraught when battling over repair requests; an agent can do “the ask” without becoming overly emotional.

6 Manage transaction paperwork.

The paperwork that goes along with a real estate transactions can be exhaustive. If you forget to initial a clause or check a box, all those documents will need to be resubmitted. A good real estate agent understands the associated deadlines and details and can help you navigate these complex documents.

7 Look out.

Any number of pitfalls can kill a deal as it inches toward closing; perhaps the title of the house isn’t clear, or the lender hasn’t met the financing deadline or the seller has failed to disclose a plumbing problem. An experienced real estate agent knows to watch for trouble before it’s too late, and can skilfully deal with challenges as they arise.

Professional real estate agents like Ujenzi plan do so much more than drive clients around to look at homes. Find an agent you trust and with whom you feel comfortable working; you’re sure to benefit from their experience and knowledge of the local market as well as negotiation skills.

 

 

 

 

 

 

 

Capital Gains Tax (CGT) is a tax chargeable on the whole of a gain which accrues to a company or an individual. This tax was re-introduced as from 1st January, 2015, following its suspension in 1985. The rate of the tax constitutes 5% of the net gain.

Net gain is determined by the excess of the transfer value over the adjusted cost of the property that is being transferred, this excess is what is subjected to tax at 5%.

The tax is to be paid by the person (resident or non-resident) transferring the property, that is, the transferor who can either be an individual or a corporate body. Property in this case constitutes lands, buildings and marketable securities.

The Law Society of Kenya and the Kenya Revenue Authority (KRA) disputed as to at what time this tax is payable, whether it is before or after a property accrues a gain on completion of a successful transfer.

A directive from KRA, as from 2016, requires the payment of Capital Gains Tax on the transfer of prior to the payment of Stamp Duty on the transfer instrument. This requirement though, posed a number land of challenges in effecting registration of transfers since registered proprietors of properties were required to pay tax on a gain before it accrues, before the purchaser releases funds to the seller and before Stamp Duty is paid on transfer instruments, as a pre-condition to register the transfer.

The High Court, on 21st September 2017, issued a ruling which upholds the principle that tax can only be paid after the accrual of a gain, and it is therefore illegal for the KRA to continue demanding payment of Capital Gains Tax before the payment of Stamp Duty through its iTax portal or otherwise.

To illustrate the impact of this law, imagine if you bought a piece of house in Nairobi’s South B area in 1983 for Sh350, 000 and you intend to sell the same house today for Sh23, 350,000. CGT computation will be on the gain of Sh23 million and will not take into consideration the impact of inflation over the years on the current price of the property.

Non-payment of Capital Gains Tax is considered a criminal offence under section 107 of the Income Tax Act. The process of recovering outstanding debts can be done by KRA through suing the taxpayer under Section 39 of the Tax Procedures Act.

Late payment of Capital Gains Tax, on the other hand, attracts penalty interest at a rate of 1% per month or part of a month on the amount of tax remaining unpaid. The interest period commences on the date the tax was due and ends on the date the tax is paid.

 

 

 

 

 

fire alarm

Fire alarm

Fire is one of the biggest threats to home safety. It is up to every property owner, to ensure their home is properly guarded against any fires and well equipped in case the fire is to occur.

Jumia House takes you through simple everyday strategies to help you prevent any fire outbreaks.

House backyard

Backyard 

Break out the bubbly, you just bought your first home! This is undoubtedly one of the most important purchase decisions you will ever make. Not only is this an incredibly exciting time, it’s also a new phase in your life.

As a new homeowner, there will be a lot of new things you will have to start thinking of buying. So start your shopping list with these 4 important purchases we think will be helpful in transforming your new house into a home.

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