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Surge in housing supply in 2016 offers reprieve in rental prices as housing deficit begins to narrow

HassConsult today unveiled the Hass Property price indices for the first quarter of 2017, showing a static performance in asking prices despite strong buying interest in the quarter. Interest in the property market is being sustained by investors looking for attractive rental and capital growth prospects often achieved in the apartment segment of Kenya’s real estate market.

This sustained interest produced a 0.4 per cent rise in asking prices over the quarter even as other segments witnessed minor price falls. Asking prices for detached houses dropped by 0. 2 per cent in the quarter while semi-detached houses recorded a 0.4 per cent drop as this segment is dominated by buyers who purchase the properties to live in and as now are postponing buying decisions as the general elections approach.

“The property market is currently being held by the investor buyer, looking for safe but strong returns over competing asset classes such as stocks and Treasury bills which have been on a bear run over the same period,” said Ms. Sakina Hassanali, Head of Development Consulting and Research at HassConsult. The total returns (constituting rental return plus capital growth) on apartments average 11.7 per cent compared with a return of 8.78 per cent on 91-day Treasury Bills and a negative 2.92 per return at the Nairobi Securities Exchange (NSE).

The return on let apartments is still superior to competing asset classes despite the quarters 3.3 per cent drop in asking rents on apartments. This reprieve on apartment rental prices has come as a result of the expanding apartment stock witnessed in 2016 resulting in the reduction of the housing gap while cushioning tenants in light of increased cost of living that has seen annual inflation rates touch the 10 per cent mark in the quarter.

“The stock of apartments within Nairobi and its satellite towns has expanded to meet the wider demand and as more units enter the rental market landlords are reigning in asking rents to remain competitive – a boon for tenants amidst the general price increases in the economy,” added Ms. Hassanali. On the other hand, detached and semi-detached units recorded mild increases in asking rents for the first quarter of 0.7 and 0.2 per cent respectively, mild repricing as a result of tightening supply of housing within this segment.

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