RENT in Nairobi fell marginally in the last quarter of 2015, indicating a rare reprieve for residents, a report by HassConsult indicates.
Rent prices fell by an average 0.1 per cent compared to the July to September 2015 period.
HassConsult attributed the quarter-on-quarter drop to an oversupply of new properties, especially apartments whose rent declined by the highest margin of 2.3 per cent.
Residents seeking to buy homes for their families or letting, however, continued to pay more in the last quarter of 2015 after asking prices rose by 3.6 per cent quarter-on-quarter. The sales prices for residential property has been rising steadily since the last quarter of 2013.
According to the report, apartments made up 59.6 per cent of rental market in December – five times more than maisonettes and town houses combined.
HassConsult linked the oversupply of apartments to scarcity and increases in land prices that have forced developers to build high-density units to maximise land use.
That has however eroded total returns for investors, which dropped to 20.34 per cent in December from 23.99 per cent in August, the report says. Semi-detached houses generated highest returns at 26.11 per cent.
Rental yield, which does not factor in price increment, for apartments dropped to 6.29 per cent in the year to last December compared with 7.14 per cent the year before. Upper Hill posted the highest yield at 7.8 per cent, with rental prices tripling in the last three years due to high demand arising from its growing status as a business hub.
“Most of the apartments built two years ago are now reaching the market as complete property ready for rental since they are usually sold off-plan,” HassConsult research and marketing chief Sakina Hassanali said. “So whatever was built two years ago was being oversupplied (in the last quarter of 2015).”
Notable drop in rent was in Ridgeways at 2.8 per cent quarter-on-quarter, while Parklands posted a 2.4 per cent decline in sales prices.
Compared to the previous year, rent in December was 5.4 per cent higher while sales price rose 9.6 per cent.
Areas that experienced highest rental growth include Mlolongo and Ngong at 17.7 and 4.6 per cent year-on-year.
In sales, Athi River posted the highest growth at 18.8 per cent. It was followed by Karen, Kiambu, Loresho, Langata, Kiserian and Limuru at 17.3, 13.7, 12.8, 12.8, 12.3 and 11.1 per cent, respectively.
A report by Knight Frank Kenya published on September 28 indicated rent for prime retail and commercial office space was stable at $21(Sh2,210 under the then prevailing exchange rates) per square metre a month, in the first half of last year. Knight Frank had attributed this to “reduced demand from government agencies and downsizing of operations by multinationals”.
“This year, rentals may increase because of taxes ... but sales prices will continue to increase marginally,” Hassanali said. “The fact that sales prices are always increasing shows it is a healthy property market.”