Kenya-based property developers may need to increase the country’s affordable housing stock and boost mortgage financing in order to ease pressure on the private rental market. This is according to Sakina Hassanali, Head of Development, Consulting, and Research at leading real estate agency, Hass Consult.
Speaking as she released the Hass Consult Residential Price Index and Land Price Index results for Quarter One of 2019, Hassanali noted that Kenya’s real estate market is facing a major shift.
“The results…give us new insights into the direction and shifting emphasis in our nation’s property market, with clear flags from the residential index of some over-stocking at the market’s top end, as demand remains robust in the middle market and surges in the lower-end market,” Hassanali explained in a speech this week.
Eyeing shifts in the sale and leasing of property
It emerged that from the third and fourth quarter last year, Kenya began to see some profound shifts in property selling and leasing, which have become even more marked in the first quarter of 2019.
The two strongest changes have been at the very top of the market, and at the lower end, in apartment sales and rentals.
“Starting with the top end, it is a fact, and oft commented on, that the primary focus for our developers over the last two decades, and particularly in the 1990s, and the decade from the year 2000, was at the very top end of the residential market. Thus, we today entire suburbs, such as Muthaiga and Karen, Nyari, Runda and Spring Valley, filled with large detached houses, and lived in by the wealthy,” Hassanali explained.
She mentioned that areas such as Ridgeways, Lower Kabete, Loresho, Kitisuru served as evidence that the expanse of Kenya’s detached-house suburbs is now very considerable.
Economic trends are scaring foreigners away
“However, in filling Nairobi’s many top-end estates, the flight of international residents is now being felt. There has been a steady downgrading of diplomatic and donor-funded postings since the world financial crisis of 2008, with many western governments running austerity programmes to cover the debt funding for their support of the financial system at that time,” Hassanali continued.
It was revealed that economic growth and consumer demand have also affected tax revenue growth and donor funding during the decade-long ‘great recession’ that has followed.
According to Hass Consult, “this steady attrition in numbers was accelerated last year in the new government drive curbing work permits.”
This triggered a new uptick in international departures, which by the first quarter of 2019 had resulted in significant falls in the sales prices and rents of top-end detached houses, which fell by 4.4 % and 4% respectively in the first 12 weeks of the year.
“We foresee some continued downward pressure in this segment until the international economy improves or Kenya initiates policies to attract renewed growth in international residency. However, while the top end of the market has been affected by global trends and domestic policies, the other strong mover has come in apartment rentals,” said Hassanali.
Hass Consult reported in January that 2018 had seen signs of a revival in apartment rents, after nearly a decade of negative or flat growth caused by the bulge of building of new apartments, both as large high-rise blocks, for instance, across Kilimani, and as smaller multi-storey units built by private landlords throughout areas such as Ruiru, Ruaka, Juja and other Nairobi satellite districts.
The long-term stasis in apartment rents and some difficulties in filling such blocks brought a slowdown in apartment building. But Nairobi’s population continues to grow, as does the city economy, and its working classes.
The realtor noted that property sales and rentals now paint a picture of a currently excess stock of large detached houses caused by international retrenchment and exit, a solid townhouse market, supported by private landlords and expanded mortgage offerings, and a resurging apartment sector experiencing rapidly rising rents.
A wider pool of affordable housing needed
“In regard to the scale of the rise in apartment rentals, at nearly five times the rate of inflation, the significance of this price adjustment cannot be underestimated, and lends strong support to the need for the government’s current Big 4 emphasis on increasing the country’s stock of affordable housing,” said Hass.
“Few households can afford to pay 20% more in rent in a single year, and such rises demonstrate powerfully how great the need is for a wider pool of affordable housing stock and mortgage financing, in order to ease the pressure on the private rental market as the working class growth continues,” Hassanali stated.
She noted that in Kenya’s ever more sophisticated land and property market, the future of all prices is no longer powerful growth.
“But, as ever, pricing remains a remarkable pointer to unmet demand and shortages and still the clearest guide available to the most strategic development going forward,” she concluded.