The current financial strain in the global market has cooled steam on property sector recovery witnessed post-covid, with land, housing and rent prices dropping slightly.
The latest property index by the Kenya Bankers Association (KBA) however projects the industry to recover in mid-2024 as the ongoing financial impulse triggered by shaky geopolitical climate is watched keenly.
"The Kenyan market, just like the global one has had a share of challenges stemming from a near recession. A drop of 0.8, 0.76 and 0.48 per cent was noted across the land, house purchases and rent,'' the banking sector lobby says.
The dimmed demand affected the prices, which fell to 0.6 per cent on average, especially for high-end markets.
Property within the Nairobi metropolitan however reported growth in all areas, with rent, land and house prices growing at an average of 0.9 per cent.
Looking ahead to 2024, Kenya's real estate market promises continued expansion, especially in counties where mid-size investors are wooed by better land rates.
Commercially, office spaces and warehousing are in high demand, with a growing preference for serviced offices and international standards.
"With a soaring population and an annual housing deficit of 200,000 units, the residential market, particularly in rentals, offers immense potential, especially by collage and university students''.
Other market players in their latest reports shared similar sentiments, with HassConsult saying average property prices dropped 1.1 per cent in the third quarter and 3.7 per cent in the year to September 2023.
Prices of detached and semi-detached houses fell by 1.7 percent and 0.9 percent in the quarter, while apartments recorded a 1.5 percent growth in prices as buyers look for value in a challenging economy.
This was attributed to higher interest rates impacting market liquidity negatively affected demand for own-to-occupy real estate during the quarter, largely constituted of detached and semi-detached homes.
"Banks are also exercising stringent lending, mitigating the risk of loan defaults in a tightening economy that is characterised by inflation and higher taxation,'' the firm said.
The Hass Consult land price indices for the third quarter of 2023, shows prices in Nairobi's suburbs increased by 0.4 percent in the quarter and by 0.8 percent in the year.
Even so, land in the city showed signs of price recovery with only three out of the eighteen suburbs witnessing a price fall in quarter three, compared to fourteen in the previous quarter.
The recovery of land prices was heavily attributed to the resurgence of development activity post covid.
Land in Nairobi's satellite towns, however, was quicker to rise, up 2.7 percent in the third quarter of 2023 and 6.3 per cent annually.
The growth in price of land in satellite towns was almost 7-fold that of land in the city, bolstered by improved infrastructure and affordability opening it up to a wider demand base.
Ongata Rongai was a front-runner in quarterly price growth at 8.2 percent, displacing quarter two leader Thika as developers anticipate improved access due to the resumption of the dualling of the Bomas-Rongai-Kiserian road.
Ngong had the highest increase at 21.3 per cent over the year to September 2023, followed by Thika at 18 per cent and Athi River at 13.5 percent.
“Improved road infrastructure has maintained price growth in Ngong, Mlolongo, Athi River Thika and Syokimau by attracting both commercial and residential developers to the satellite towns with the benefit of easing the strain of congestion in the city while providing more affordable housing solutions on the city fringe,” head of Development Consulting and Research at HassConsult, Sakina Hassanali said.
Langata remained the suburb with the highest land price growth on higher density development potential, easy access to major economic nodes (CBD, Upperhill, Mombasa Road) and lower land price per acre compared to neighbouring suburbs.
The rental market, in contrast, experienced a price growth of 0.4 percent on average over the quarter, backed by the outperformance of apartments compared to detached and semi-detached units.
Apartment rental prices grew 3.2 per cent in the quarter, with affordability a key consideration, while prices for detached and semi-detached houses fell 0.7 per cent and 0.4 per cent respectively.
For the submarket performance, Cytonn says Gigiri, Westlands, and Parklands were the best-performing nodes realizing average rental yields of 8.5, 8.4 and 8.1 per cent respectively in Q3’2023, compared to the market average of 7.7 per cent.
Their impressive performance was attributed to several factors including: - the abundance of Grade A office spaces with high-quality amenities commanding premium rents, thus appealing to investors with the promise of attractive returns.