Luxury homes market stable

The luxury homes market in Nairobi has reached a plateau with both rental and home prices recording little change over the last year.

According to the Knight Frank Prime Global Cities Index, which tracks the movement of luxury residential prices across 33 cities, Nairobi saw a rise in prices of only 0.7 per cent between September 2013 and September 2014.

The only other African city on the index, South Africa’s Cape Town, recorded an increase of 9.5 per cent in the same period.

This slowdown is, however, seen across the board. The index reports that prices for prime residential property in the world’s leading cities rose by only 0.2 per cent in the three months to the end of September and by four per cent over a 12-month period.

 Top city

The city that topped the rankings, Jakarta — with prices rising 27 per cent in the year to June — has seen a sharp decrease in prices, rising by only 2.5 per cent in the first half of 2014. In this period, Nairobi saw a slight dip of 0.8 per cent. Cape Town rose by 7.3 per cent.

It will be remembered that in another Knight Frank report this year, the Prime Global Rent Index, Nairobi recorded weak growth in prime rents in the second quarter of the year.

The rental index showed that in Nairobi, asking rents for key tenants such as the diplomatic community appeared to have reached their ceiling. This, combined with security concerns, helped explain the slowing pace of growth.

Dubai, which in the Prime Global Rent Index, recorded a 14.1 per cent increase in prime rents in the year to June, leapfrogging Nairobi, only saw a 2.6 per cent increase in luxury homes prices in the same period.

Last month, as HassConsult unveiled the results of its third quarter property price index, Sakina Hassanali, Hass Consult’s head of research and marketing, said: “The market correction to rents that we flagged in 2011 - as property yields moved to lows of around seven per cent - now appears to be reaching its conclusion and we are moving into a new period of takeoff in sales prices and investment returns.”

“Rents rose by more than 30 per cent in the 18 months from January 2012, in a steep and continuous upward trend, but the growth has slowed during 2014, to just 0.4 per cent in the third quarter,” she said.

Speaking at the launch, Hassanali expressed optimism that the results of the index showed a return to stability. “While we see a likelihood of some further rent increases, we believe the market has substantially adjusted and that rents will now be more stable,” she said.

Back to the Knight Frank Prime Global Cities Index, there is an explanation for the global slowdown.

 Price growth

“This moderate level of price growth is partly attributable to the fact that the third quarter, for much of the world, is dominated by the summer holiday season, which often sees slower sales activity reducing the pressure on prices,” reads the index.

Other happenings thought to be contributory factors to this include the prospect of a tightening monetary policy in the US, the approaching General Election in the UK, the persistence of cooling measures in key Asian cities and perhaps most pivotal, a new set of negative economic indicators emanating from Europe.

“In Dubai, the rate of luxury price growth has declined. This is in part due to temporary factors such as Ramadhan which led to weaker buyer activity but also due to the UAE Central Bank’s mortgage cap,” says the index.

Tokyo and Cape Town were the strongest performers.

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