Property owners and developers are counting losses as an oversupply of both residential and commercial housing units, coupled with credit crunch erode their earnings.
The latest market update from property consultancy firm Knight Frank indicates that values in the country’s property market fell by more than six per cent in the past year, dashing hopes of a long-anticipated recovery.
“The price of the prime residential property fell by 1.8 per cent in the first half of this year, increasing the annualised decline to 6.7 per cent in the year to June,” said Knight Frank in its market report.
Prime residential rents reduced by 1.7 per cent taking the annualised decline to 3.3 per cent in the year to June.
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The average rental rates for office space in Westlands, Upper Hill, Kilimani and Nairobi’s Central Business District (CBD) have all plateaued, with some of them hitting a five-year low.
Cement production also decreased by 5.8 per cent from 1.55 million tonnes in the first half of 2018 to 1.46 million tonnes over a similar period this year, pointing to a slowdown in construction projects as developers sit out the current glut.
“The value of building plans approved in Nairobi County decreased to Sh48.54 billion in the first quarter of 2019, a 19.2 per cent drop from Sh60.11 billion recorded in a similar period last year,” explained Knight Frank in part.
Rents for prime spaces in shopping malls also decreased by 5.9 per cent in the first half of 2019 to Sh480 per square foot per month. This is as landlords come under pressure to attract new tenants and retain existing occupiers.
“These factors have transformed the market in favour of buyers and tenants, which has been exacerbated by multinationals continuing to downsize whilst there are fewer expatriates relocating to Kenya, impacting negatively on the niche market,” states the report in part.
Listed property firms also felt the squeeze with Stanlib’s Fahari listed real estate investment trust (I-REIT) posting a 14 per cent drop in earnings from operations.
“Stanlib Fahari I-REIT’s unit price closed at Sh9.20 in June, which was 54 per cent lower than its initial listing price of Sh20.00,” explained the report in part.
“Home Afrika’s share price closed in June at Sh0.62, which was 95 per cent lower than its initial listing price of Sh12.00.”
