HassConsult today announced the results of the Hass Residential Price Index for the fourth quarter of 2017, revealing a sustained demand for semi-detached housing, against a generally sluggish property market in the year.
Overall, property inflation continued to be sluggish in the fourth quarter, as asking prices stabilized, following some slowdown in enquiries and sales closure in the first 10 months of the year. There was a 0.3, 0.6 and 0.1 percent growth in house prices in October, November and December which led to an overall 1.0 per cent rise in property prices in the final quarter, up from 0.1 per cent in the preceding quarter.
Asking prices for apartments fell 1.1 per cent in the quarter while semi-detached houses continued at the same pace of positive growth, recording a further 3.4 percent rise in the quarter, allowing annual growth to remain in positive territory at 1.8 percent by
December 2017, bucking market trends as detached houses and apartment turned negative.
“The protracted electioneering process, limited financing, high inflation and tightened liquidity was largely felt in the low and top end market segments. Reduced spending meant even those who would otherwise consider a high-end market house compromised and settled for community living in a semi-detached housing neighbourhood available on both sale and let,” said Ms. Sakina Hassanali.
Rental prices for semi-detached houses also recorded a positive growth in asking rents at 1.4 per cent in the final quarter while asking rents for all properties fell by 1.2 per cent in the quarter and overall fell by 3.9 per cent in the year. Highest rental declines were
reported in Upperhill at 9.4 per cent.
The growth of Upperhill as a commercial hub has seen a reduction in supply of new residential houses leaving a high concentration of old stock to let which has seen tenants move out in favour of new modern houses in Kilimani, a fact that partly explains the fall in rent prices in the area in the 3 months to December and an average drop of 11.7 per cent in the year.
“With newly finished properties doubling up in the ‘to let’ market, landlords with relatively old buildings are finding it hard to retain fashionable tenants who are keen on trendy and more spacious homes. As a result, they are forced to adjust prices to remain competitive or flattening old buildings to develop new structures,” explained Ms. Hassanali.
The subtractive rises in pricing and rental returns, and the further limited lending opportunities resulted into a challenging year for the real estate market, such that the returns from rent and price increases were at their lowest. “Investors earned 6.66 per cent total returns (rental yields +price growth) on let apartments in 2017, the lowest yields since September 2010.
Similarly, a new landlord recorded 7.36 per cent in returns on let semidetached houses down from 21.1 per cent in 2016,” added Sakina. At the same time, shrewd investors keen on exploiting new grounds and motivated by continued investment on infrastructure have now set camp in Limuru, Tigoni, Ongata Rongai and Ngong satellite towns.
Ongata Rongai and Ngong are set to host stations under the 120km Nairobi-Naivasha standard gauge railway (SGR) line as the two areas grow to key economic hubs. Limuru and Tigoni continue to reap from the near completion of some key government sanctioned access roads like the Kabuku (St. Pauls) to Tigoni; Ruaka-Banana-Limuru and Kabuku to Ngecha road.
“Despite the uncertainty that crowded other sectors, property largely remained a favourite investment vehicle outsmarting all other asset classes albeit recording a slowdown on average in the entire year,” said MS. Sakina Hassanali.