Property, land prices rise after shaky 2017
The real estate sector is slowly bouncing back after a tough 2017, with rental and property prices rising between April and June.
According to the HassConsult property and land price index, rental prices in Nairobi are up 3.3 percent in the second quarter of 2018, while property prices are up by 3.6 percent on an account of renewed confidence in the real estate market.
Despite apartment oversupply across different parts of the capital, landlords are expected to hike rents as the sector bounces back.
Speaking during the release of the report, HassConsult head of development and research Sakina Hassanali said developers would reap the highest rewards from the boom even as she expects the continued hold on interests to pose challenges to growth prospects.
“Landlords are now confident enough to renew rent escalations which had been halted due to uncertainties, but we are not yet out of the woods as the interest rate caps which have affected liquidity in the market still pose a challenge,” Ms Hassanali said.
Langata posted the highest rent price increases in the apartment segment at 3.7 per cent.
Tigoni was the best performing satellite town in house rent price increases, increasing by 4.8 per cent in the quarter.
Ruaka was the top performer in the apartment rental market with asking prices increasing by 3.9 per cent over the quarter and 11.5 per cent on an annual basis.
According to the report, Ngong’ holds the greatest potential for satellite towns with rental price increases of 5.8 percent in house prices and 6.9 percent for apartments.
Prospects for growth in real estate may however be constrained by the stagnation in land prices with the pricing for the good remaining depressed as developers take advantage of the renewed confidence to clear built up housing stocks from over the last two years.
Land prices in Nairobi rose by a marginal 0.23 percent in the last quarter while land pricing for satellite towns escalated by only 0.5 percent.
The slowdown in credit growth for the market coupled with the dwindled purchasing power has increased distressed assets on the market further hampering growth in land pricing.
Ms Hassanali said the reintroduction of capital in the market will foster an even greater growth rate for Kenya’s real estate scene.
“While renewed confidence in the housing sector will spur property market growth as developers move to introduce new supply, the property and land markets will only reach full potential when much needed capital is re-introduced to the market,” she said.