Kenya’s property market rebounds, driven by low interest rates

Hass Consult's Research and Marketing Manager Sakina Hassanali during the launch of the company’s index report. [PHOTO: WILBERFORCE OKWIRI/STANDARD]

NAIROBI: Kenya’s property market is on a rebound following a lower interest rate regime that has seen improved earnings for investors in the country’s lucrative real estate market.

According to the findings of the latest quarterly index by real estate consulting firm Hass Consult, Kenya’s property market is showing signs of recovery from the harsh interest rates in 2011 and 2012 which had caused a slump in developments.

“It now seems like our market is moving into a renewed upswing as predicted based on the slowdown in new building that struck with the high interest rates of 2011 and 2012,” stated Head of Marketing at Hass Consult, Ms Sakina Hassanali.

“There is a time lag in the impact of measures such as these and housing projects that were shelved in 2011 and 2012 would have been new houses on the market in 2014.”

The year 2011 saw the shilling hit a record low against the dollar after shedding 25 per cent of its value that year settling at 107 against the dollar.

The Central Bank of Kenya (CBK) increased its key lending rate in an effort to stabilise the poorly performing currency, an effort that led to a high interest regime and exorbitant cost of credit for the better part of 2012.

In the run-up to the 2013 General Election investors adopted a wait and see attitude and many capital investments, largely in the real estate industry, were put on hold.

The election jitters were further followed by a string of insecurity and terrorism related attacks that dampened investor confidence for several months slowing down uptake of commercial space particularly in malls.

Investor returns

However, it appears that the market is finally on a slow but steady rebound with sales prices and investment returns for investors in the industry much higher than they were three years ago.

“The market correction to rents that we flagged in 2011 as property yields moved to lows of around 7 per cent now appears to be reaching its conclusion and we are moving into a new period of take-off in sales and investment returns,” stated Ms Hassanali. “Rents which had risen by as much as 30 per cent in the 18 months from January 2012 in a steep and continuous upwards trend have now stabilised to just about 0.4 per cent in the third quarter of 2014,” she stated.

Asking price for properties which had been static for apartments and detached houses moved up significantly in the third quarter, by 3.6 per cent and 3.2 per cent while semi- detached house prices also continued to rise (although more slowly), at 2.4 per cent on the previous quarter.