REPORT

Residential sector records high returns in Q3 2020

Overall outlook for the real estate sector is neutral, supported by; positive demographics, improving infrastructure, improved access to mortgage, and, continued focus on affordable housing

In Summary
  • Apartments in Ridgeways, Runda Mumwe and Thindigua record the highest returns to investors in Q3’2020 registering the highest capital appreciation at 3.0 , 2.6 and 2.3 per cent, respectively.
  • The retail and commercial office sectors however recorded declines in rental yields to 7.4 per cent and 7.2 per cent in Q3’2020.
DEMAND: Prospective buyers visit a development christened Kirichwa Shelters in Kilimani, Nairobi. Photo/FILE
DEMAND: Prospective buyers visit a development christened Kirichwa Shelters in Kilimani, Nairobi. Photo/FILE

The residential sector recorded higher average total returns to investors at 5.4 per cent compared to detached markets at 4.2 per cent in the third quarter of 2020, according to Cytonn Investments 2020 market review.

Apartments in Ridgeways, Runda Mumwe and Thindigua recorded the highest returns to investors in Q3’2020 registering the highest capital appreciation at 3.0 , 2.6 and 2.3 per cent, respectively.

The retail and commercial office sectors however recorded declines in rental yields to 7.4 per cent and 7.2 per cent in Q3’2020, from 7.8 per cent and 7.5 per cent, respectively in FY’2019.

 

The land sector recorded an overall annualised capital appreciation of 2.4 per cent, indicating that investors still consider land as a good investment asset in the long term.

This saw land asking prices record an overall annualised capital appreciation of 2.4 per cent.

According to the report, Gigiri, Westlands and Karen were the best performing office nodes in Q3’2020 recording rental yields of 9.0, 8.1, and, 8.1 per cent, respectively.

This was attributed to the relatively good infrastructure mainly the road networks easing access to the areas and exclusivity of the areas with high quality offices thus attracting high-end clients and premium rental prices.

In the retail sector, Westlands and Karen were the best performing nodes recording average rental yields of 9.7 and 9.3 per cent, respectively, attributed the residents’ high consumer purchasing power with the areas hosting high end income earners.

Out of the six sectors, the outlook is positive for one sector-land; neutral for three sectors-residential, retail and hospitality sector; and, negative for two sectors-commercial office and listed real estate.

Therefore, the overall outlook for the real estate sector is neutral, supported by; positive demographics, improving infrastructure, improved access to mortgage, and, continued focus on affordable housing.

 
 

Factors likely to constrain the growth of the sector going forward include; business restructuring and downsizing thus affecting uptake of office space, constrained finances for developers, tough economic environment which has limited consumer spending and the existing oversupply in the office and retail sectors.