What you need to know:
- In addition to influencing economic changes, different demographics influence societal attitudes that impact neighbourhoods. For instance, many millennials on social media have successfully created an image that presents Nansana as a place that is inhabitable for the middle and upper classes.
Neighbourhood evaluation is essential for all real estate stakeholders because it helps in understanding past trends, current conditions and future changes.
Understanding these dynamics is a critical first step in identifying areas that have potential for particular property investments. For instance, the rise in home prices in a neighbourhood is an indicator of an up-and-coming area and this detail will help stakeholders determine whether to invest or not.
Because of the rapid urbanisation Uganda is going through, areas are constantly evolving. Some places go through so much transformation within a matter of months which means that as a property developer or real estate investor, you need to always be able to predict these changes before they do, for you to make any significant investments.
This guide is a starting point for those interested in learning to analyse these trends. Here are some general indicators that can help you evaluate a neighbourhood and predict possible changes.
The presence of newer and larger properties such as multi-billion shopping centres, office structures, villas or hotels is an indicator that the area is in a rapid growth transition. This also means that there is a possibility of existing structures being demolished and this will lead to inconveniences of displacement or evacuations.
So, if you are a renter, this area might not be the right neighbourhood for you because you might be forced to move unceremoniously.
As an investor, this is a place to keep on your radar.
Until the late 2000s, areas of Mutungo, Butabika and Luzira were dominated by older families locally known as bataka. But due to their proximity to the city, these suburbs began experiencing dynamic changes in the type of residents, infrastructure and economic activities.
The rising cost of land due to increasing demand motivated the local property owners to sell off their properties and move. This inexorable trajectory solidified these suburbs into prime areas of investment for successful property investors.
Miriam Tusubira, the proprietor of Infotrust Property Consultants, says one can ably evaluate the potential and status of a neighbourhood by analysing the transition it is going through.
And it always follows that when one neighbourhood experiences changes, chances are that those changes will spill over to the surrounding areas.
Tusubira says using this indicator, she decided to buy and invest in Ssonde, a Wakiso suburb when she realised how fast Namugongo was transforming.
“I knew that sooner than later people would finally need to expand to nearby places, which made Ssonde a prime land. Its proximity to urban centres such as Kira, Namugongo and Kyaliwajala meant that people would comfortably invest there and I was right. Ssonde is now one of the most sought after areas for homeowners and property developers interested in constructing residential properties for rent,” Tusubira says.
Besides private investment, public infrastructure such as schools, hospitals and highways always boost the development of a neighbourhood.
“Ever since the completion of the Express Highway, more people are attracted to the surrounding areas resulting in heavy investment in places such as Munyonyo, Mukono and Kyaggwe. One will also notice an influx of newly established recreation centres, shopping centres and exclusive residential areas coming up around universities, secondary schools or major hospitals,” she notes.
Just as other things in life, structures over time deteriorate and become obsolete leading to a decline in value. The decline of areas can be attributed simply to the migration of households with good incomes and successful businesses to better places.
For instance, some older suburbs such as Naguru, Ntinda, Nakawa went through a phase where former residents moved out in huge numbers leaving many properties vacant.
These neighbourhoods were beginning to show signs of deterioration until recently when they started undergoing major construction and renovation. So, the presence of outdated structures is usually an indicator that an area is likely to experience transformation any time.
However, not all old suburbs are destined to decline. Areas such as Kololo and Muyenga, which although have a lot of older structures show no signs of losing their popularity or depreciating in value, this has consequently fostered confidence and optimism among the property owners and residents.
This is an indicator that such areas have reached their maturity phase and little transformation is expected to occur, meaning the cost of real estate will be astronomical, which will affect profit margins for any buyer or property developer.
Socioeconomic status of residents
Knowing who lives in a neighbourhood is essential in evaluating its value. Adnan Mpuga, the operations director at Eastlands Agency, says selling areas of Kisasi, Kyanja, Namugongo to clients in the early 2000s was an uphill task because most of his clients did not know anyone in those areas.
“But there was a ripple effect when Ntinda started opening up facilities for rent and new residents moved in. these new residents were able to attract their friends and relatives who felt confident enough to buy properties in the neighbouring areas. It is therefore, safe to assume that when specific groups, such as households with high and stable incomes, homeowners and people with advanced levels of formal education start moving into a neighbourhood, they will attract more of their kind,” Mpuga observes.
They are also likely to elevate the neighbourhood because they are able to influence policies that benefit their communities, and attract quality facilities including schools, hospitals, shopping and entertainment centres.
On the other hand, if the area is mainly used for commercial purposes, changes in business activity can be an indicator of changes in neighbourhood culture.
High-calibre business establishments have the potential to transform an area exponentially as they attract the kind of renters that are able to afford the increased costs of commercial rent. Simultaneously, this will affect small-scale businesses as the bigger businesses out-compete them.
Demographic of residents
Mpuga notes that age and household type are common indicators of the status of the area. Often younger, childless, well-educated adults have a different culture from that of older and larger households.
An area that is dominated by young adults is ripe for investments such as bars, shopping facilities and restaurants that support their lifestyle. Investors should also invest in single-family homes, condominiums and multifamily rental buildings.
This demographic tends to prioritise luxury living. So, for developers to make profit on their investment, they should not only provide larger apartments but ensure all the facilities cater to these tastes.
In addition to influencing economic changes, different demographics influence societal attitudes that impact neighbourhoods. For instance, many millennials on social media have created an image that presents Nansana as a place that is inhabitable for the middle and upper classes.
Type of Ownership
The type of residents can reveal the growth stage of a neighbourhood. Areas that have a high combination of renters and low income housing have high possibilities of transition because they may struggle to pay increased property taxes as home values rise. Similarly, an area that has wealthier residents is most likely to be more stable and more attractive to the middle and upper class. But this also means that land for sale is scarce or very expensive.
However, such communities come with benefits such as easy access to all national services such as connection to the national water and electricity grid because they have higher civic engagement. Such areas are also safe and secure as the community is able to organise community policing, install measures such as security lights and cameras which discourage idlers and other malcontents.
“Entebbe Road is one of the safer and more secure areas in Uganda. This includes areas of Bwebajja, Kakungulu, Kitende, Kisubi, Abayita ababiri, Katabi, all the way to Entebbe because most of the residents of these areas own their homes,” Mpuga says.
Construction of new real estate increases options leading to upward movement and downward filtering of existing real estate.
As most structures that were at one time the preserve of middle- or even upper-income households, age and become obsolete, they attract lower-income occupants.
The process eventually, leaves structures that no one is willing to buy or occupy. Such properties are common in areas that are more than 30 years old.
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Such properties, particularly those that are incomplete or dilapidated are a reflection of a neighbourhood in decline. They are also strongly associated with crime and violence. Their presence consequently will affect the surrounding areas causing property values to drop.
Getting rid of some but not all of the vacant properties in a neighbourhood is much less likely to have any impact, the best strategy would be the removal of all vacant properties and redeveloping the area.
Unless one has the potential to do so, Tusubira cautions against investing in such areas because they are less likely to attract tenants and consequently any meaningful socioeconomic development.