House prices fall as developers struggle with unsold units

Housing Property
Sakina Hassanali Head Of Development Consulting & Research Hass Consult,Hass Consult unveiled land price trends revealing that investors have adopted a cautious approach towards investing in Nairobi's Donholm suburb which has seen prices in the area drop by 2percent in the quarter [Photo, Wilberforce Okwiri]
The real estate sector is a buyer’s market as distressed sellers move to discount property prices.

This is according to the Hass Property Index quarter two report for 2019 released yesterday in Nairobi. The House Price Index showed that property prices fell by three per cent. Detached houses dropped by 4.5 per cent in the quarter, making them “the best deals for bargain hunters”.

“We have seen an increase in distressed properties in the market as reflected by advertised property auctions. Additionally, developers are offering generous terms which continue to suppress prices and rents to the point where investors are opting for safer short-term investments while they cherry pick the best bargains in the market,” said Sakina Hassanali, Head of Development Consulting and Research at Hass Consult.

‘No bubble’

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At the same time, Hassanali dispelled fears of a property bubble burst in the Kenyan market, noting that the factors that lead to such a situation, like access to cheap financing, were not there.

“A bubble is turbo-charged by cheap finance, we don’t have cheap finance, right now what’s happening is for someone to buy a property, they actually have to have all the money for it,” she said.

“In Kenya, we are not at any risk of a bubble, what we have is a slowdown,” she said.

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The price index showed that Juja had the highest drop in house prices over the quarter, going down by 4.1 per cent. On the end of the spectrum, apartment prices in Athi River rose by 2.8 per cent over the same period.

Athi River, however, had a mixed bag of fortunes. While house prices went up, rental prices here recorded the biggest drop among the sampled areas, with a reduction of 3.9 per cent.

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At the same time, land prices in Nairobi suburbs remained fairly static, while those of satellite towns rose by 3.2 per cent.

Commercial market glut

Hitherto commercial development hotspot, Upper Hill, cooled off, a trend the index attributed to developer demand slowing down “due to stock of commercial property remaining vacant and expected glut as more properties come to the market”.

However, it remains the most expensive with an acre going for an average of Sh550m.

The uncertainty over the validity of title deeds also affected land prices in some areas.

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The report showed that prices in Donholm, Nairobi, dropped for three consecutive months, since the National Lands Commission announced in late March that it was yet to determine the validity of titles to some parcels of land. “... investors shy away from any area where there are doubts on the validity of titles,” said Hassanali.

“Real estate development is capital-intensive and therefore it is understandable that investors would take caution before going ahead with plans and as such this affects prices,” she said.

Previously, Donholm had been one of the best-performing suburbs, buoyed by the construction of Outer Ring Road.

Hassanali pointed out that a similar fate befell towns in Kaimbu in 2017 when they recorded drops in prices following uncertainty over proposed new land laws.

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