mikeotechi
September 22nd, 2009, 09:51 AM
By Carol Musyoka Business Daily
Posted Monday, September 14 2009 at 00:00
Last week I was stuck in hideous traffic about two shakes of a duck’s tail from my house. Every single inch of road was covered by the never ending ingenuity of Kenyan drivers to create paths where no car has ever trodden.
In keeping with the same herd mentality — of which I am very ashamed to admit I subscribe to every now and then — I had the ingenious idea of taking a rather circuitous route to my house via a securely manned gated community.
As soon as I approached the padlocked gate, the security guard asked me who I was going to see and I promptly gave him a name of one of the residents that I happen to know lives there.
Open sesame and a shorter path to my house was provided. As I smugly drove through the formerly public but now privatised road, my daughter chimed from the back seat “Mummy, are we going to visit uncle so-and-so?”
Without thinking I quickly responded “No, I am just using a short-cut.”
“Well, then you told a lie to that askari at the gate and it means that you are going to hell, because Jesus does not like liars!” was her caustic rejoinder.
Having been dispatched to eternal hell and damnation by my six-year-old judge, it got me thinking about how little pieces of information can determine an industry’s destiny.
Last week, I was pleasantly surprised to visit the Kenya National Bureau of Statistics website and find relatively up to date information on leading economic indicators such as prices of tea, coffee, visitor arrivals and departures at JKIA, oil, sources of electricity, production of soft drinks, assembled vehicles and much more monthly data, ranging from as early as March 2009 to as recent as July 2009.
It was extremely refreshing to find a government department that has gone the electronic way to disseminate critical economic data, and even more so to find such data to be relatively up to date where July 2009 numbers were available, but with room for improvement where only March 2009 data was available.
However one of the most surprising jewels of data that I unpacked was the latest figures from the Nairobi City Council for the value of building plans approved between June 2008 and June 2009.
Having discussed in several forums whether Nairobi’s property bubble was about to burst, I now felt ready to tackle that debate armed with credible numbers on what the foreseeable future held in store as far as supply was concerned.
The data from Nairobi City Council provided the value of approved building plans for both residential and non-residential structures, allowing the reader to determine a reasonable trend analysis.
It would be even more useful if the reader was given such data for the last 10 years – wishful thinking I admit – but armed with other economic data, information that would allow a researcher in the real estate industry to make a fairly reasonable short to medium term projection of the future.
Why would such information be useful? Using the United States as an example, the US Census Bureau publishes monthly data in its New Residential Construction Report, referred to by Wall Street as “Housing Starts”.
The report provides three metrics which are housing starts, that is, the beginning of the foundation of the home, building permits as of when they are granted and finally, housing completions. The data typically divided into single family and multiple-unit housing, covers the entire country and is used by a variety of industries.
In the manufacturing industry, for example, it enables manufacturers to predict future demand for home appliances, fabricated metal, nonmetallic mineral and wood products that are some of the largest contributors of inputs used in residential construction.
For the real estate industry, the data, coupled with information on housing sales, helps residential developers forecast supply and demand for either single family units or multi-family units such as apartments.
In 2005, which was close to the peak of the housing bubble in the United States, housing analysts believed that many developers converted their structures for rental apartments into apartments for sale, the latter of which are called condominiums in American parlance. This was largely due to a higher demand for purchase of apartments driven by the favourable mortgage environment that eventually led to the sub-prime mess.
Coming back to Kenya, further details from the Kenya National Bureau of Statistics would help drive predictable business assumptions for certain industries.
To begin with, the survey of approved building plans should extend to other urban centres such as Mombasa and Kisumu as well as the Greater Nairobi municipalities such as Ngong, Mavoko, Thika and Limuru that are also benefitting from the construction boom.
Armed with this information, suppliers of inputs for residential and non-residential construction such as cement manufacturers, wood suppliers among others are able to forecast whether to shrink or grow stocks.
For the tax collector, data on residential units for sale can be correlated to the number of owner-occupier tax benefits being claimed to derive the number of units that should be generating rental income and therefore taxable income.
For the financial industry, such data can be used to forecast demand for construction loans and residential as well as commercial mortgages. Where such data is juxtaposed to interest rates forecast, adequate provision can be made for demand for, or reduction, in mortgages.
If interest rates are forecasted to drop then a higher number of housing starts for example would generate a higher demand for mortgages and vice versa.
Such information also helps the loan approvers determine if a developer seeking a loan for a residential or commercial construction project is following or bucking the trend within the construction industry and make an informed decision thereof.
Further granularity in the data provided by the Statistics Bureau would be useful in the area of completions versus permits issued. Such information helps data users to see a history of completed projects which provides a level of accuracy in predicting what the final housing stock will be vis-à-vis the building permits granted. It also helps data users to identify the effects of the overall economy on the ability of building projects to be concluded.
As they would say in the Royal Ascot Derby, “we’re off to a good start” and I must give credit to the team at KNBS for collecting and publishing critical economic data that is practical to industry players in planning for the future.
The devil, they say, is in the detail and getting further detailed analysis in terms of geographical scope and types of residential and non-residential building plans will give data users far stronger capabilities to make informed business decisions.
Personally, I’m off to look for divine forgiveness to avoid the fire and brimstone that I’ve been threatened with following my traffic avoiding kerfuffle!
Posted Monday, September 14 2009 at 00:00
Last week I was stuck in hideous traffic about two shakes of a duck’s tail from my house. Every single inch of road was covered by the never ending ingenuity of Kenyan drivers to create paths where no car has ever trodden.
In keeping with the same herd mentality — of which I am very ashamed to admit I subscribe to every now and then — I had the ingenious idea of taking a rather circuitous route to my house via a securely manned gated community.
As soon as I approached the padlocked gate, the security guard asked me who I was going to see and I promptly gave him a name of one of the residents that I happen to know lives there.
Open sesame and a shorter path to my house was provided. As I smugly drove through the formerly public but now privatised road, my daughter chimed from the back seat “Mummy, are we going to visit uncle so-and-so?”
Without thinking I quickly responded “No, I am just using a short-cut.”
“Well, then you told a lie to that askari at the gate and it means that you are going to hell, because Jesus does not like liars!” was her caustic rejoinder.
Having been dispatched to eternal hell and damnation by my six-year-old judge, it got me thinking about how little pieces of information can determine an industry’s destiny.
Last week, I was pleasantly surprised to visit the Kenya National Bureau of Statistics website and find relatively up to date information on leading economic indicators such as prices of tea, coffee, visitor arrivals and departures at JKIA, oil, sources of electricity, production of soft drinks, assembled vehicles and much more monthly data, ranging from as early as March 2009 to as recent as July 2009.
It was extremely refreshing to find a government department that has gone the electronic way to disseminate critical economic data, and even more so to find such data to be relatively up to date where July 2009 numbers were available, but with room for improvement where only March 2009 data was available.
However one of the most surprising jewels of data that I unpacked was the latest figures from the Nairobi City Council for the value of building plans approved between June 2008 and June 2009.
Having discussed in several forums whether Nairobi’s property bubble was about to burst, I now felt ready to tackle that debate armed with credible numbers on what the foreseeable future held in store as far as supply was concerned.
The data from Nairobi City Council provided the value of approved building plans for both residential and non-residential structures, allowing the reader to determine a reasonable trend analysis.
It would be even more useful if the reader was given such data for the last 10 years – wishful thinking I admit – but armed with other economic data, information that would allow a researcher in the real estate industry to make a fairly reasonable short to medium term projection of the future.
Why would such information be useful? Using the United States as an example, the US Census Bureau publishes monthly data in its New Residential Construction Report, referred to by Wall Street as “Housing Starts”.
The report provides three metrics which are housing starts, that is, the beginning of the foundation of the home, building permits as of when they are granted and finally, housing completions. The data typically divided into single family and multiple-unit housing, covers the entire country and is used by a variety of industries.
In the manufacturing industry, for example, it enables manufacturers to predict future demand for home appliances, fabricated metal, nonmetallic mineral and wood products that are some of the largest contributors of inputs used in residential construction.
For the real estate industry, the data, coupled with information on housing sales, helps residential developers forecast supply and demand for either single family units or multi-family units such as apartments.
In 2005, which was close to the peak of the housing bubble in the United States, housing analysts believed that many developers converted their structures for rental apartments into apartments for sale, the latter of which are called condominiums in American parlance. This was largely due to a higher demand for purchase of apartments driven by the favourable mortgage environment that eventually led to the sub-prime mess.
Coming back to Kenya, further details from the Kenya National Bureau of Statistics would help drive predictable business assumptions for certain industries.
To begin with, the survey of approved building plans should extend to other urban centres such as Mombasa and Kisumu as well as the Greater Nairobi municipalities such as Ngong, Mavoko, Thika and Limuru that are also benefitting from the construction boom.
Armed with this information, suppliers of inputs for residential and non-residential construction such as cement manufacturers, wood suppliers among others are able to forecast whether to shrink or grow stocks.
For the tax collector, data on residential units for sale can be correlated to the number of owner-occupier tax benefits being claimed to derive the number of units that should be generating rental income and therefore taxable income.
For the financial industry, such data can be used to forecast demand for construction loans and residential as well as commercial mortgages. Where such data is juxtaposed to interest rates forecast, adequate provision can be made for demand for, or reduction, in mortgages.
If interest rates are forecasted to drop then a higher number of housing starts for example would generate a higher demand for mortgages and vice versa.
Such information also helps the loan approvers determine if a developer seeking a loan for a residential or commercial construction project is following or bucking the trend within the construction industry and make an informed decision thereof.
Further granularity in the data provided by the Statistics Bureau would be useful in the area of completions versus permits issued. Such information helps data users to see a history of completed projects which provides a level of accuracy in predicting what the final housing stock will be vis-à-vis the building permits granted. It also helps data users to identify the effects of the overall economy on the ability of building projects to be concluded.
As they would say in the Royal Ascot Derby, “we’re off to a good start” and I must give credit to the team at KNBS for collecting and publishing critical economic data that is practical to industry players in planning for the future.
The devil, they say, is in the detail and getting further detailed analysis in terms of geographical scope and types of residential and non-residential building plans will give data users far stronger capabilities to make informed business decisions.
Personally, I’m off to look for divine forgiveness to avoid the fire and brimstone that I’ve been threatened with following my traffic avoiding kerfuffle!