PROPERTY PRICES

Tough times, debt slows down property market

Sales prices stagnate and rental prices across board decline due to lack of liquidity

In Summary

•Satellites towns with newly finished modern units and more affordable asking prices have become favourite for bargain hunters.

•The government agenda of late has been infrastructure driven which could have positive effect impact on property prices however the debt burden that has been created from this that is sweeping liquidity from market and has the exact opposite negative effect,” she said.

A side view of SEAFAR apartment on October 18, 2018. The building is marked for demolition by NEMA. /FILE
A side view of SEAFAR apartment on October 18, 2018. The building is marked for demolition by NEMA. /FILE

House buyers are opting for remote parts of Nairobi and  satellite towns for cheaper units due to tough economic times.

The Hass Property price index for the third quarter of 2019  shows satellite towns with newly finished modern units and more affordable asking prices are favoured by bargain hunters.

This led to increased asking prices for rents in Thika, Limuru, Mlolongo, Tigoni, Ongata Rongai, Kitengela and Ruaka metropolis between July and September.

 
 
 

“Asking rents for a modern apartment may cost as little as Sh23,400 and this means well for many tenants who are now preferring affordable units as they take caution to save in the wake of job losses across all sectors,” HassConsult head of research and marketing Sakina Hassanali said.

She said that as the cost of living soars, the lower middle class is opting to pay slightly more in transport but less in rents.

Overall, asking rents dropped by 0.9 per cent over the quarter.

At the same time, land prices in suburbs grew at a slow pace almost stagnate at 0.22 per cent while those in satellite town growth stood at 1.44 per cent.

“Within the industry, there was discounting on closing prices and land being offered by banks and much distressing sales. However prices to hold on the advertised price,” she added.

According to Hassanali, the price stagnation on both rental prices, house sales and land prices have also been affected by lack of liquidity from constrained budgets coupled by with interest rate caps.

“The government agenda of late has been infrastructure driven which could have positive effect impact on property prices however the debt burden that has been created from this that is sweeping liquidity from the market and has the exact opposite negative effect,” she said.

She said this is the situation being witnessed  at the moment.

 
 


At Sh23,400, the average asking rents for apartments in Thika makes the satellite town the most affordable. 
The town saw a 1.3 per cent rise in asking rent prices in the quarter and was the only satellite town that recorded a double-digit increase in apartment rents on an annual basis by 13.3 per cent.

Tigoni also recorded a growth in asking rent prices at 3.5 per cent while Ongata Rongai saw a 3.1 per cent growth.

Parklands was the best performing suburb with rents in the area increasing by 1.9 per cent over the quarter and 9.3 per cent annually.

On the losing end, Loresho recorded a 2.7 per cent drop over the quarter and 3.5 per cent over the year.

On the land market, Tigoni had a 2.89 per cent increase in land prices, while Syokimau was the top on an annual basis with 10.58 per cent growth in the land price.

Gigiri suburb recorded a 2.11 per cent drop over the quarter while Upperhill at 2.5 5 per cent on an annual basis.

The market-driven interest rates is expected to nudge banks to return to longer-dated loans as opposed to the present situation where most loans are short-term.

"REal estate projects tend to be long-term like more than three years and as such when loans are shortened many potential developers or mortgage borrowers tend to be locked out of the credit market," she added.