Kenya’s real estate sector contribution to GDP declined marginally by 0.1% to 7.0% in 2018, from 7.1% in 2017. The industry recorded a slowdown in growth rate by 2%, managing to grow by only 4.1% compared to 6.1% in 2017.
Cytonn, have attributed the slower growth rate to inaccessibility and unaffordability of off-take financing, with the credit advanced to the sector recording a slight decline of 0.5% to KSh. 368.7 bn as at end of 2018, from KSh. 370.7 bn as at the end of 2017.
According to KNBS data, the value of private building plans approved in Nairobi County decreased by 12.7% from KSh. 240.8 bn in 2017, to KSh. 210.3 bn in 2018, while the value of completed buildings issued with certificate of occupancy in Nairobi County increased by 5.2% to KSh. 90.6 bn in 2018.
This follows the long running oversupply in most segments of the industry, especially in high-end locations where most of the capital packing has taken place. The surplus has forced many investors into a halt, to allow for market correction as occupancy in the commercial office and residential have come under pressure from lack of tenants for more than 12 months now.
According to Knight Frank 2018 market updates prime residential prices fell by 4.5% in 2018, compared to a 0.9% drop in 2017 prime rents for high-end office space stagnated at US$1.3 per square foot per month owing to the current oversupply.
Meanwhile the construction sector recorded a slower growth of 6.6% in 2018 compared to an 8.5% growth in 2017, 1.9% points lower than in 2017 making the sector’s contribution to fall slightly by 0.2% points to 5.4%, from 5.6% in 2017. Cement consumption recorded 1.6% increase from 5,856.6 million tonnes in 2017 to 5,948.7 million tonnes in 2018 supported by an increase in activities in the sector with the length of roads constructed increasing by 9.8% in 2018 to 18,655 km compared to 17,034 km in 2017.
The sector also saw an increase in the number of loans and advances by 1.8 % to KSh. 114 billion in 2017. Data from the national statistics body shows strong correlation between the two sectors.