REPORT

Property market resilient as COVID-19 takes toll on global economies

Apartments recorded the strongest growth over the quarter with asking rents at 2.1 per cent

In Summary
  • House prices slightly edged up by 0.9 per cent over the quarter driven by a mild performance from detached and semi-detached markets which recorded a 1.3 per cent and a 0.9 per cent growth respectively.
  • Zillow, a  real estate and rental marketplace in the US, conducted a study on housing during previous pandemics and concluded that while home sales dropped during an outbreak, home prices stayed about the same or only suffered a slight decrease.
Apartment in Nairobi. FILE
Apartment in Nairobi. FILE

The property market remains stable amid uncertainty which grew towards the end of the first 2020 quarter when Kenya recorded the first case of the COVID-19 pandemic, a report by HassConsult reveals.

“Whereas the property market began showing signs of resilience as confidence trickled in, the COVID-19 pandemic will have an effect going forward,” said Head of research and marketing at Hass Consult, Sakina Hassanali.

House prices slightly edged up by 0.9 per cent over the quarter driven by a mild performance from detached and semi-detached markets which recorded a 1.3 per cent and a 0.9 per cent growth respectively, sustaining the trend recorded in the previous quarter the report indicated.

“It is important to note that Kenya recorded the first case of COVID-19 towards the end of the quarter and therefore the real effects of the pandemic will begin to emerge from the second quarter.”  Hassanali said.

Zillow, a  real estate and rental marketplace in the US, conducted a study on housing during previous pandemics and concluded that while home sales dropped during an outbreak, home prices stayed about the same or only suffered a slight decrease.

This is largely due to the fact that there is little opportunity for prices to change when there fewer transactions.

According to Zillow, this data is reflected in other global markets and is expected to be similar in Kenya.

Similar to the sales market there was a mild increase, across all market segments, in rents over the first three months of the year at 1.6 per cent.

Apartments recorded the strongest growth over the quarter with asking rents at 2.1 per cent, showing recovery after falls in mid 2019, followed by detached houses at 1.7 per cent and semi-detached houses at 0.9 per cent.

The rise in rents for apartments has led to the rise in rental yields in the category to 7.19 per cent by end March 2020 compared to rental yields of 6.76 per cent recorded in the same period in 2019.

 

“The rental market may be more severely affected in the short to medium term as more companies scale down operations and send Kenyans home due to the ongoing pandemic resulting to pressure on landlords to give waivers or discounts until the economic situation returns to normalcy and this will be reflected in prices,” Hassanali said.

Apartments also recorded the strongest growth in rents at 2.9 per cent against the overall property rents slight drop of 0.7 per cent.

Despite recording strongest growth, it also recorded a slight decline of 0.4 per cent on prices over the quarter continuing a period of price stagnation bringing the total annual decline to 2.0 per cent.

The property market has significantly outperformed the NSE-20 in the last 5 years, with Sh 100 invested in the stock market in Q1. 2015 returning Sh40 in Q1. 2020 while the same invested in property would return Sh122 in the same time frame.