HassConsult today reported a continuing shift to growth in the Kenyan property sector’s mid-market, as the top-end market adjusts to international pressures and tightening budgets.
Unveiling its property sales and rental price indices for the first quarter of 2019, HassConsult reported that the strongest price growth in the first 12 weeks of the year was in apartment rents, which rose by 4.9 per cent in just three months, taking the year-on-year growth to 19.6 per cent.
“This represents a profound correction in apartment rental pricing,” said Sakina Hassanali, Head of Development, Consulting and Research at HassConsult.
“Almost a decade of static or falling apartment rents has served to deter many landlords, and thus developers, but the demand has continued to grow, now moving us back towards higher occupancy rates and a return to some levels of over-demand for rented apartments.”
However, returning to building after the decade of slowdown in apartment pricing would require close attention to location and gaps in the market.
“The Kenyan property market has matured, and the only apartments that will now sell and fill quickly are those where developers have properly researched the market and constructed accommodation that fills a proven and unmet need,” said Sakina.
In this, Kenya may also now start to see a new trend in the more widespread conversion of large detached houses into multiple residences. Developer construction over the last 30 years has been dominated by the building of large homes on individual plots, in estates such as Spring Valley, Runda, and Nyari, and areas such as Muthaiga and Karen.
However, a substantial proportion of these homes were occupied by international residents. As governments globally have continued to curb foreign spending following the extra debt loading they took on during the financial crisis of 2008, many international and aid-funded operations have been retrenched.
At the same time, changes to Kenya’s work permit regime marked a sharp exodus of internationals in 2018, leading to the vacating of many larger properties. As a result, the prices of detached houses for sale fell by 4.4 per cent in the first quarter of 2019, while rents fell by 1 per cent, as owners and sellers cut prices in an effort to sell or refill.
Only in the mid-market of town houses has growth remained solid and inexorable, with sales and rentals having slowed marginally, but remaining robust. In the first quarter of 2019, rental prices on town houses rose by 1.7 per cent, taking year-on-year growth to 11.1 per cent, while sales prices rose by 1.3 per cent, taking year-on-year growth to 7.9 per cent.
“Each quarter we see ever more marked evidence of the relative strength and demand for properties in the middle and lower market, versus the clear slowdown at the top end of the market,” said Sakina.