Apartment rental prices rose by 15.9 per cent in 2018, making it the was the most marked improvement since mid-2009. This is according to the latest release by Hass Consult who today revealed the quarterly sales and price indices.
The report also shows that there was a general recovery in the residential property sector in the fourth quarter of 2018. The strongest recovery came in apartment rental prices, which have suffered almost a decade of suppressed growth, driven by intensive building throughout Nairobi and its suburbs.
“We saw an industry wide recovery in the final months of 2018, with rents rising, sales prices rising, and industry activity picking up generally, after the marked declines of 2017 and early 2018,” said Sakina Hassanali, Head of Development, Consulting and Research at Hass Consult.
“The somewhat slower pace of apartment building in the last two years has finally seen demand catching up with the available space, lifting occupancy and driving apartment rents upwards sharply by November and December 2018,” she added.
As the leading asset class within real estate for private landlords, apartments have been among the most volatile for pricing, but the falls in apartment rental prices throughout 2017 gave way to stabilising prices from January 2018, and a surge in rents by the final quarter of the year.
Rentals prices for semi-detached houses also bounced back in 2018, rising by 12.6 per cent, in their strongest uptick since 2016. However, rental prices for detached houses continued to suffer from weak demand, shifting up just 3.7 per cent in 2018, to regain their previous peak of early 2017 by year end.
According to Hass Consult, detached house rentals continue to be the segment of the market most influenced by the shifts in the global economy, filling in as the relatively temporary accommodation of highly paid, but transient professionals.
“Thus, while the fundamentals of economic growth began to play through in all other segments of the property market late last year, against the backdrop of slower building, detached house rental prices continued to be affected by subdued global demand and the contraction in global grant-based activities,” said Sakina.
This was a shift that played out in property pricing trends across Nairobi, with the strongest sales price rises in the fourth quarter reported in areas such as Karen and the Nyari Estate, where prices rose by 5.8 per cent in the 12 weeks from October to December last year.
However, rental prices in Karen and Nyari fell by 0.5 and 0.6 per cent over the same three months of last year. Across all areas, sales price growth of 9.0 per cent for detached houses and 9.7 per cent for semi-detached houses similarly reflected the strengthening demand for upmarket properties. But apartment sales prices remained relatively stagnant, achieving growth of just 2.9 per cent in 2018.
“The Kenyan buying of larger homes is now picking up, while the underlying growth in middle class and working-class rentals is also growing. However, we see two spots of the market that remain subdued. Apartment purchasing remains slow on weak mortgage and home loan support for first-time buyers and some landlord aversion following lower rental yields in recent years.”
In addition, the report revealed that apartments that are unusually appealing or meet specific needs are selling rapidly with strong pricing, but in areas of over-supply, purchases continue to lag.
She also highlighted the impact of reduced international spending which continues to be felt in the city’s most upmarket suburbs in the form of static and even declining rental prices. These are markets where tenants are mostly expat types or high-ranking multinational officials.