Nairobi’s prime residential market is anticipated to recover within the first half of 2018 as the wave of political uncertainty dissipates, ending a period of price correction experienced in 2016 and 2017, according to a Knight Frank Kenya report.
The inaugural Inside View Kenya report shows that prime residential prices increased by 0.9% in the nine months to September 2017 compared to a percentage point decline in a similar period in 2016. A 2.8% decline in prime residential rents was recorded in the first six months of 2017, which was lower than the 3.2% decrease in a comparable period in 2016.
“An oversupply of prime properties for rent is behind the weaker prime rental growth, which has given tenants more leverage to negotiate with landlords. In a market dominated by expatriate tenants, corporate budget cuts by multi-national firms have further influenced the performance of the high-end residential segment,” the report states.
Despite the sluggish performance of prime residential rents in the year, it is projected that the market segment may be reaching its cyclical trough and is about to turn around. Transactional activity in sales is expected to pick up in 2018, the Inside View Kenya 2018 report notes, with Nairobi and Mombasa seen attracting interest from local and international buyers.
Ben Woodhams, Managing Director at Knight Frank Kenya, said: “Kenya has a long-standing reputation as a destination for holiday home ownership, and with the political turbulence behind us, we are forecasting an increase in such investments in line with a strong economic recovery in 2018.”
Among factors making Kenya an ideal investment destination include a projected 5.8% GDP growth rate in 2018, rapid urbanisation at 4.3% per annum versus a global average of 2.0%, an expanding middle class, and positive demographics such as high population growth at 2.6% annually against Sub-Saharan Africa’s average of 2.3%.
The report notes that currency movements over the two years to November 2017 made it cheaper for foreign buyers, as purchasers acquiring prime residential properties priced at Sh100 million would have saved up to 8.2% through euro-denominated transactions, while dollar-denominated purchases were 1.4% cheaper. The Inside View Kenya 2018 is an inaugural report featuring a prime residential market overview, current research, as well as a buying guide.