Oversupply halts prices and rents in high-end market

Richland Pointe Apartments in Kahawa West, Nairobi. July 2018. [Wilberforce Okwiri, Standard]
Home buyers are showing more preference for more floor space, showing that developers can benefit from increased plinth area by opting for higher-density developments. 

This, and location, had an influence on home prices towards the end of 2018, says the Kenya Bankers Association House Price Index.

According to the index, house prices increased marginally by 1.49 per cent in the fourth quarter of 2018, reversing the downward trend that prevailed in the preceding three quarters of the year.

The pattern, the report says, mirrors the price evolution experienced in 2017, with indications that the slow pace of price growth experienced in the past quarters will continue to prevail. This reflects “the general house-price stability, attributable to the supply-demand dynamics in the housing market”.

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Apartments constituted 76 per cent of units offered in the market, followed by bungalows (12.1 per cent) and maisonettes (11.6 per cent).

Prime market oversupplied

At the same time, a different report indicates that oversupply in Nairobi’s prime residential market resulted in declines last year, turning the segment into a buyer’s market.

Knight Frank’s Kenya Market Update report for the second half of 2018 shows that prime residential prices fell by 4.5 per cent in 2018, compared to a 0.9 per cent drop in 2017.

Rents in the top-end of the market also dropped by 1.3 per cent in 2018, albeit a slower decline compared to the previous year’s 2.8 per cent slide.

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In the commercial property segment, prime rents stagnated at $1.3 (about Sh130) per square foot per month owing to the current oversupply. The report shows absorption of Grade A office space rose by 63 per cent in the six months compared to the first half’s uptake.

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