Expatriates exodus hurts house market

Sakina Hassanali, Head Of Development Consulting and Research at Hass Consult. [Wilberforce Okwiri/Standard]

Last year’s purge on foreign nationals working in Kenya illegally has dealt a blow to Nairobi’s upmarket real estate sector, which has reported a decline in rental prices following a sudden drop in expatriates looking to rent out the high-end property.

Property firm Hass Consult said sales and rental prices for a number of residential areas known to host high-spending expatriates recorded a four per cent drop over the first quarter of 2019.

The Ministry of Interior in 2018 undertook an exercise to flush out foreign nationals that had been working in Kenya without requisite documents. In the crackdown, over 4,000 illegal immigrants were reportedly nabbed.

Sakina Hassanali, head of development consulting and research at Hass Consult, noted that this, as well as the financial crisis over a decade ago that resulted in foreign missions and aid organisations cutting their budgets and workforce, had resulted in a drop in returns from real estate in some of the leafy suburbs.

“Changes to Kenya’s work permit regime marked sharp exodus of international residents in 2018, leading to the vacating of many larger properties,” she said at a briefing yesterday.

“As a result, the prices of detached houses for sale fell by 4.4 per cent in the first quarter of 2019, while rent fell one per cent as sellers cut prices in an effort to sell or refill.”

Ms Hassanali said the impact of the 2008 financial crisis was yet to wear off and if anything, foreign missions and NGOs were still cautious and “have continued to curb foreign spending.

“Many international and aid-funded organisations have retrenched,” she added.

At the same time, Hass Consult said grassroots development is increasingly squeezing the life out of investment in city houses.

The grassroots “uprising” is working against investing in established cities, for residential as well as business purposes.

Grassroots

This is because while sales and rental prices for semi-urban areas have been rising over the last 10 years, fully urban areas have been struggling to catch up with their emerging counterparts.

“Grassroots drive mid-market properties as top-end falls,” says the report, adding that only in the mid-market of town houses has growth remained solid.

This is supported by the fact that in the first quarter of 2019, rental prices in that segment rose by 1.7 per cent, taking year-on-year growth to 11.1 per cent, while sales prices rose by 1.3 per cent for year-on-year growth of 7.9 per cent.