Nairobi has dominantly enjoyed foreign direct investments across all real estate segments in the past decade but that now appears to be fast ebbing away.
The launch of affordable housing by the government as part of its Big Four agenda has not helped the situation for companies that borrowed funds to put up structures.
Realtors are reporting poor sales, making them default on development loan repayments with their half-done houses being auctioned. Prospective house owners are demanding refunds.
Lenders have in turn mooted out-of-court settlement deals, hoping to give loanees time to settle them.
The demand is also falling for apartments, with Kenya Bankers Association (KBA) reporting a 13.7 per cent drop to 62.6 per cent in the first quarter of 2019, especially after the government launched an affordable housing programme with the first 300 units set for delivery in September.
This has seen prospective houseowners register with the State department of housing hoping to be allocated the rent-to-own units that will retail at between Sh900,000 for a studio apartment and Sh3 million for a three-bedroomed apartment.
“The housing market is predominantly in the middle-income segment that would potentially change upon implementation of the government-fronted Affordable Housing Programme,” says KBA.
Private buyers have also suffered immensely following the ‘Bomoa bomoa’ campaign where the government is restoring public spaces, road reserves and riparian lands. This has made many hopeful property owners go slow on purchases as they await clarification on property ownership papers.
HassConsult’s head of research Farhana Hassanali says there is an urgent need to reaffirm the authenticity of property ownership papers. He says most Kenyans prefer to rent than to own for fear of losing their money in case their houses are pulled down to make room for public utilities.
Analysts feel the market is deeply saturated, thanks to heavy local and foreign investments in real estate as investors target to make huge profits.
Various studies released by local firms indicate poor access to credit has hurt the market, with lenders unwilling to loan individuals on the strength of title deeds, the property or payslips. Lenders cite the property slump and shaky employment environment.
Banks say Kenyans are not buying property as fast as they traditionally did, making them change tack in deciding who to give a loan based on the borrower’s financial history. They say payslips have lost their allure as companies kept up retrenchments as a cost-cutting measure.
Global property consultancy, Knight Frank, in their latest study, say falling demand has made Nairobi’s property prices decline by 6.5 per cent in the past 12 months and blamed it on oversupply of newly completed property.
This has seen realtors sustain last year’s rent prices. Others have reduced rent to retain ‘good’ paying tenants while allowing ‘bad’ ones to relocate.
“The situation has also witnessed less transactions being executed in the past year, with rental prices stagnating or softening by a half percentage in the past three months,” it says.
Knight Frank’s Prime Global Cities Index says this has made Nairobi’s position fall to 42 out of 45 global cities Knight Frank has a presence in.
Knight Frank’s Head of Agency Anthony Havelock says they anticipate a further fall as more property units come up across Nairobi’s suburbs.
The suburbs continue to attract heavy investments especially for gated communities where investor-developers have mooted new lifestyle ‘barometers’ that preach experiences based on greenery, water features and walkways as well as basement parking bays.
“The build-up in supplies has also resulted in high vacancy levels in rental houses, piling pressure on rents in the top end of the market, with further reductions expected,” he says.
Among the latest developments now selling off-plan is Applewood property in Karen by Cytonn Investments going for Sh180 million, Entim Sidai’s two-storeyed maisonettes in Karen — marketed by Pam Golding at Sh120 million and HassConsult’s Enaki in Gigiri, selling at Sh80 million.
Central Bank of Kenya has said holders of Sh5 million and above should report to them before effecting any changes, thereby creating a new hurdle in ease of cash movement.
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