Nairobi developers are counting huge losses following a persistent slump in the prices of most property segments, new data shows.
According to the latest edition of the Knight Frank Prime Global Cities Index, values of prime residential real estate in the capital fell by 4.5 per cent in the nine months to September this year. Property values have been on a sustained decline since 2016, with Knight Frank attributing the drop to oversupply and distressed liquidity during the period under review.
“We haven’t reached the bottom of the cycle yet, and we expect to see further reductions in the near-term until the macroeconomic and local situations improve,” said Anthony Havelock, head of agency at Knight Frank Kenya.
“One of the major issues right now is illiquidity in the market. Deals are happening but are few and far between and at discounted rates. It will take time for the economy to rebound considering it’s also not immune to external shocks.”
According to Mr Havelock, the rising number of distressed properties in Nairobi has also affected prime residential values as lenders intensify efforts to recover non-performing loans through the sale of collateral.
This year has seen a record number of auctions, with several high-value land and residential properties going under the hammer. “The removal of the interest rate cap should see a return of liquidity to the market, which will, in turn, lead to a recovery in the medium-term,” Havelock explained.
The Knight Frank Prime Global Cities Index is the latest report to paint a bleak picture for property developers and owners in Nairobi and its environs. The Kenya Bankers Association (KBA) housing index released last week revealed a 2.2 per cent decline in the third quarter of 2019, the third consecutive drop this year.
“If the price softening is sustained into the last quarter of the year and going forward, it will be a pointer to a market correction that comes after a long streak of house prices increases,” said KBA.
The banking industry lobby said apartments continue to remain popular, accounting for 84 per cent of units on offer in the quarter under review.