Rents in documented neighbourhoods in urban centres have risen ten times faster in the last nine months compared to last year. This is the highest increase ever recorded – as landlords pass on costs associated with interest rates and income tax to tenants.
“The surge in rental prices comes as landlords cover high finance and other costs at a time there is an increased volume of people seeking the same pool of rental properties,” said Farhanna Hassanali-Hashmi, property development manager at HassConsult.
“It is a rise that starkly brings homes the immediate impact of the bottlenecks caused in building and buying by pushing finance out of reach of many developers and mortgage owners.”
The seven per cent in rent increase registered was in the first half of the year, with apartments recorded the highest rate of rent increase at 10.33 per cent. This means that an apartment charged sh25, 000 as rent at the beginning of the year now attracts rents of close to Sh30, 000.
The shocking trend will also most certainly lead to a spike in inflation, which measures the cost of living, as rent is a key component.
In what might be a red flag to policy makers over possible social upheavals that normally accompany such revelations, tenants who are bearing the brunt of the trend are bystanders caught between a tight monetary policy stand.
Following a tight monetary stand adopted by the Monetary Policy Committee over the last seven months, to tame inflation and forex volatility, landlords have been forced to dig deeper into their pockets to service loans – a cost which they in turn are passing on to tenants.
Tight monetary policy saw interest rates almost double – averaging 23 per cent from an initial 14.5 per cent. The trend confirms a recent report released by Renaissance Capital on the effect of the tight monetary policy stance on the overall economy which showed that real estate and construction as some of the sectors hugely affected.
“There can be few sectors quite as relieved as the mortgage industry going by last week’s news of easing of the CBK base rate,” said Caroline Kariuki, the chief executive of The Mortgage Company, a mortgage brokerage firm.