Nairobi Real Estate Markets
Credit: bitcoinmagazine

Kenya’s property markets could face liquidity constraints in the coming months, forcing a further price drop.

The first-quarter housing market report from hassconsult shows that uncertainty grew towards the end of the quarter when Kenya recorded the first case of the COVID-19 pandemic. However, prices generally remained stable from the previous quarter.

Apartments recorded the strongest growth over the quarter with asking rents at 2.1 percent, followed by detached houses at 1.7 percent and semi-detached houses at 0.9 percent. Similarly, apartments recorded the strongest growth in rents at 2.9 percent against the overall property rents slight drop of 0.7 percent.

“It is important to note that Kenya recorded the first case of COVID-19 towards the end of the quarter and therefore the real effects of the pandemic will begin to emerge from the second quarter. Globally the pandemic has caused markets, across all asset classes, to perform poorly but the extent of this effect on our local market will depend on how we manage the COVID-19 pandemic,” said Sakina Hassanali, head of research and marketing at the firm.

She said that as more companies scale down operations and send Kenyans home due to the ongoing pandemic there will be pressure on landlords to give waivers or discounts until the economic situation returns to normalcy and this will be reflected in prices with the rental markets being more severely affected in the short to medium term.

Speaking in the aftermath of COVID-19, property firm MySpace Properties recently said that prices are expected to drop by 10 percent in the short-term following job losses and falling disposable income in the majority of households.

Ken Gichinga, chief economist at Mentoria economics, a local based economic think-tank, said that the behaviour of property markets going forward will depend on how much money the government is willing to inject into the economy.

“The situation right now remains very fluid. Much will depend on how much liquidity the government will pump into the economy. If they move slowly, we might see a sharp drop in prices due to weak demand, coupled with an oversupply of units,’ he said.

He added that a recent move by the government allowing pension scheme holders to access up to 40 percent of their funds for a home purchase will have a positive effect on the sector’s liquidity but may not be significant to counter falling home prices.

“Already there has been a move to create legislation to allow pensioners to access up to 40 percent of their pension funds to purchase homes. This might release some much-needed liquidity into the market but I’m not sure it will be sufficient to prevent a price drop. For now, we can only watch and pray,” he told Estate Cloud.

Read; Nairobi land recorded the biggest price drop in more than a decade

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