Average prime residential prices in Nairobi declined by 2.9% over the first half of 2020 compared to a decline of 1.8% in the first half of 2019, pushing the annual decline to 5.1% in the year to June.
Prime residential rents also declined over the review period by 6.55% compared to 1.67% over a similar period in 2019, taking the annual decline to 7.62% in the year to June.
The decline in both prime residential rents and prices is mainly attributed to the continued oversupply of residential developments, unfavourable economic climate, low liquidity and expatriates returning to their home countries.
According to Knight Frank, prime residential rents are expected to decline further in the second half of 2020 due to the projected negative economic growth, tighter liquidity, continued relocation of expatriates and less disposable income from potential tenants.
Knight Frank has released the Africa Residential and Office Dashboards that examines the residential and office market performance in 29 African cities during the COVID– 19 pandemic.
The research shows that residential rents remained relatively stable across the Africa region in the first half of 2020 despite the COVID-19 pandemic and subsequent lockdowns imposed.
Of the 29 African cities observed, 60% recorded stable or increased rents over the first half of the year. While physical viewings were restricted in the majority of the markets, a surge in virtual viewings was observed over the review period.
Kenya’s average prime residential prices in Nairobi declined by 2.9% over the first half of 2020 compared to a decline of 1.8% in the first half of 2019, pushing the annual decline to 5.1% in the year to June.
Lagos, Nigeria recorded the highest increase in prime residential rents a 38% increase from Q4 2019. This increase was attributed to the need for quality living spaces due to remote working offered by prime residential real estate.
According to Knight Frank, in the short to medium term, there may be a reduction in residential demand. However, affordable housing demand is expected to persist, owing to the increasing number of young professionals in African cities and the need for space in the wake of the COVID-19 pandemic.
“There has been a surge in the exit of expatriates from the continent due to pre-existing economic challenges and the COVID-19 pandemic has resulted in subdued demand in the prime residential sector. However, the need for quality living spaces due to remote working is anticipated to result in increased demand in this sector in the medium term,” Tilda Mwai, Knight Frank Researcher for Africa said.