The Cytonn report says the residential sector recorded improved performance in FY’2021, with the average total returns increasing by 1.4% points to 6.1%, from 4.7% recorded in FY’2020.
Rental yields averaged at 4.8%, 0.1% drop from 4.9% recorded in FY’2020 showing reduced ability to raise rents as economy remains weak and spending power remains constrained Overall, Rongai was best performing node with total average return of 8.8% due to increased rental demand.
In FY’2021, detached units recorded an improvement in performance with average total returns to
investors coming in at 5.6%, a 1.4% points y/y increase from the 4.2% recorded in FY’2020. On a q/q basis, the total returns represented a 0.8% points increase from the 4.8% recorded in Q3’2021.
The best performing segment was the upper mid-end with total returns at 6.0% higher than the 5.8% and 4.9% recorded in the lower mid-end and high-end segments, respectively. Overall, Ruiru and Ngong were the best performing nodes, with an average total returns of 8.2% and 8.0%, respectively, attributable to availability of large parcels of land for detached units. The performance can also be attributed to key infrastructure developments with Ruiru being served by the Thika Superhighway and linked to the Eastern Bypass as well, while Ngong is served by Ngong Road whose Phase III upgrade is currently ongoing.
The improvement is attributable to the improved investor confidence in the residential market due to less uncertainties in the Real Estate market compared to 2020
Cytonn Research
Apartments recorded a significant improvement in performance with the average total returns coming in at 6.7%, a 1.5% points y/y increase from the 5.2% recorded in FY’2020. This was attributable to a 5.3%
average rental yield and an average y/y price appreciation of 1.4%. On a q/q basis, the average total return increased by 0.6% from the 6.1% recorded in Q3’2021.
The lower mid-end satellite towns were the best performing segment with an average total return of 7.3%. The lower mid-end suburbs and upper mid-end areas recorded average total returns of 7.1% and 5.7%, respectively. This performance was attributable to increased returns in the major satellite town nodes where infrastructure developments are currently ongoing. These include Syokimau and Athi River which are touchpoints to the Nairobi Express Way, Ruaka and Kikuyu linked by the ongoing Western Bypass, Ruiru where the conversion of the Eastern Bypass into dual carriage way ends, and Ngong served by Ngong Road whose Phase III upgrade is currently on course. The demand in this areas has been increasing as investor and renters rush to secure residential spaces in these areas before the completion of the mega infrastructure project.
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