Investigations are being conducted by Kenyan authorities into the nature of many funds being injected into the local housing market according to reports released this week, particularly over the concern of illicit funds being used in the land and housing markets to launder cash while at the same time driving up costs. Over the past few years costs have risen across metropolitan areas by 200-300%, some of the largest increases seen around the world. With homes holding an expected market value of $200,000 USD being sold for $500,000 USD this is cause for major concern for many people, both locally and internationally.

For others this real estate boom has seemed like a blessing in disguise, granting huge benefits for developers and investors who were in the area prior to the market boom. Still this joy is not well-spread throughout the local population as many people find it harder and harder to afford homes in their own neighbourhood, regardless of what financing they may try to work out. This trend is similar to many that have faced large cities throughout Asia as well, such as the real estate boom in Shanghai from 2000-2004 that saw similar increases in house values and now is causing many local residents to relocated outside of the main city limits in order to find affordable homes.

Should the investigation reveal unfavourable facts there is a high chance that the prices may drop significantly in the coming months or years, however a rebound will also be quite likely shortly after that due to the fact that the infrastructure is not developed well enough to allow domestic and overseas investors from all walks of life into the local market. Being one of the premier interest spots for most European and Asian companies today Africa holds a lot of promise in regards to the profitability it could carry in both the short- and long-term, so bear this in mind when looking at places to invest. Conversely be careful when locking into any fixed-rate loans as you never know how the economy may turn. What may be strong now may stagnate, so be sure to research fully before making any commitments.

Set as a major portal to both Africa and the Middle East, Cairo is looking to establish itself further by capitalising upon recent improvements in its local economy to bolster its housing market and potentially see large increases in property value in 2010. This could mean a potential cost-effective investment for international housing buyers looking to diversify their investment portfolio.

The primary drive behind Cairo’s success and anticipated continued development in the coming year is not speculative as many other markets but is entirely driven by the actual needs of the local area for both residency and tourism. This is causing strong increases in value for residential as well as office, hotel and commercial sectors across the city as the over-focus and saturation of luxury housing is dwindling in lieu of comprehensive development across urban sectors.

Having a strong focus in locally on a cash-based system as many developing areas do Cairo is now branching more into a combination of modern and developing society, allowing for those who are willing to take on a mortgage to have strong potential purchasing power in the area. This is designed to attract additional investors who are looking at taking out overseas mortgages to invest in the area for development and capitalise on the growth that is occurring rapidly.

While this may not be the best option for first-time buyers who are not ready to accept some risk along with their investments this is still a keen opportunity for others who are looking to diversify their earnings potential by looking elsewhere for both short- and long-term sustainable returns on investment that they may not find by looking purely at a domestic market. At the same time if the world economy does not pick up in the coming months this will most likely be a longer-term investment that needs to be weighed out before committing to it completely, as increasing property value will be more dependent upon the city’s overall development and an increase in foreign interest that might not pick up until a few years in the future.

In a report published today by international property consultants Jones Lang LaSalle, the cities of Abu Dhabi, Dubai, Cairo and Casablanca are tapped to be the most likely to attract long term capital to their real estate markets.

For some time, long term investors have been reluctant to invest in the Mena (Middle East and North Africa) region, because of the short term speculative mentality of both investors and develop ers there.

‘Creating the right environment to attract long term investment into Mena real estate markets remains a work in progress. While few of the necessary requirements have yet to be fully met, significant progress has certainly been made in many critical areas,’ said the Jones Lang LaSalle report.

Rental prices in the area  have fallen between 25 and 50%, and many short-term speculators have stopped investing there.

The analysts predict that the rest of the year will see more falls and prices corrections.

The key to investing in this area is for  private family groups, conglomorates, government entities and institutional investors such as insurance companies, pension funds and listed real estate companies to bear the brunt of the burden – bringing in stability and long term capital.

In property price news from South Africa, the latest property price index reports that the average price of a property increased by 1.2% year-on-year in June.

These numbers come from Ooba, which is the largest mortgage company in the South Africa.  Saul Geffen, chief executive of Ooba, points out that this upturn in prices may not be a sign that the market is recovering. ‘….it may be attributed to a shift to higher priced properties in June, given affluent homebuyers’ ability to better adapt to strict bank lending practices,’ said .

Accordig to Ooba, the average purchase price was R784,427(£59,439) in June 2009, up from R774,449 (£58,683) in June 2008. In addition, the month-on-month average purchase price has increased nominally by 1.4% from £58,657 in May of this year.

But there are more numbers, not all good. The average price of a home purchased by a first time buyer has fallen by 14.1% year-on-year, which is a drop of 16.8% in comparison to May 2009.

Property purchasers now require an average deposit of 18.9% of their purchase price in order to secure a home.  Last year, the average deposit needed was only 12.2%.

Ooba predicts that recover will not occur entirely until  mid 2010.

Real estate agents have also joined together to help people avoid foreclosure by implementing a quick sale scheme, the Quick Sell Plan,  which was introduced by FNB Home Loans.

Under this scheme, home owners benefit because they can sell their property quickly without going into foreclosure and losing their credit rating, and buyers get good properties without having to pay a deposit. 

A minimum reserve price is established on each Quick Sell property and buyers, introduced by the FNB partner agents, are offered mortgages up to 100%.The buyers also receive a 50% discount on transfer costs and loan registration.   The buyer must meeti FNB’s affordability criteria and FICA requirements

The commission of the real estate agents is paid by FNB.