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October 17, 2018

Nairobi’s rental appreciation down on political uncertainty

Property Leo, One west Park in Westlands in Nairobi on September 8.
Photo/Enos Teche.
Property Leo, One west Park in Westlands in Nairobi on September 8. Photo/Enos Teche.

Price appreciation in Nairobi’s residential property have dropped this year on the back of increased political uncertainties, analysts have said.

Prices in 2017 appreciated by 3.8 per cent down from 7.4 per cent reported last year, according to the 2017 Nairobi Metropolitan Residential Report.

The report, released yesterday, noted that during the period under review, the political environment posed a challenge with investors who have this year adopted a wait-and-see attitude. This, analysts said, drove down the industry’s transaction volumes.

“This is attributed to investor anxiety over the 2017 elections and thus they postponed making long-term investment decisions,” Cytonn Investments research analyst Nancy Murule said.

Future price stagnation was expected in selected markets with surplus supply.

During the review period, average rental yields grew marginally by 5.6 per cent compared to 5.2 per cent recorded last year. Muriel said this indicated sustained demand for rental housing.

The report states that there is currently a housing deficit of about 1.9 million units, 70.7 per cent in the lower middle income market segment. The low income segment accounts for 26.4 per cent of the deficit.

“We expect the market to stabilise through 2018 after the elections period,” Murule said. “Investors therefore need to invest in proper market research and trend analysis to identify specific market niches.”

The study named Thindigwa, in Kiambu, the most attractive location for residential property investment with the area delivering total returns of 19.3 per cent due to the areas proximity to high-end suburbs and the central business district.

Other well performing regions were Ridgeways with returns of 18.4 per cent, Lang’ata ( 17.4 per cent ) and Juja ( 17.3 per cent ).

Murule said the entry of more institutional investors such as Saccos, private equity firms and funds as well as foreign institutions would spur growth in the country’s real estate sector.

Some of these include Africa Development Bank, Taaleri, Islamic Development Corporation and China Africa Development Fund which she said were focused on reducing the housing deficit in Kenya.

“We expect continued growth in real estate sector on the back of improved macroeconomic conditions, sustainable high returns and a changing operational landscape as developers strive to satisfy the high housing deficit,” Murule said.

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