The apartment market is seeing a price resurgence backed by renewed demand for inflation beating investment assets in a period where the Kenya shilling is losing value.
According to Hass Property Sales and Rental price indices for the third quarter of 2023, the rental market experienced a price growth of 0.4 percent on average over the quarter, backed by the outperformance of apartments compared to detached and semi-detached units.
- •Apartment rental prices grew 3.2 percent in the quarter, with affordability a key consideration, while prices for detached and semi-detached houses fell 0.7 percent and 0.4 percent respectively.
- •Suburbs such as Riverside, Langata and Westlands performed best in rental price growth of between 1.5 percent and 3.4 percent.
- •Compared to other asset classes, overall property rental returns have outperformed the equities market on an annual basis, but trail the returns on offer on treasury bills.
“Apartment returns of 5.9 percent in the year to September are however higher than those in savings, which averaged 4.05 percent by the end of August,” Sakina Hassanali, Head of Development, Consulting and Research at HassConsult, said.
Prices of detached and semi-detached houses fell by 1.7 percent and 0.9 percent in the quarter, while apartments recorded a 1.5 percent growth in prices as buyers look for value in a challenging economy.
Higher interest rates impacting market liquidity negatively affected demand for occupy-to-own real estate during the quarter, largely constituted of detached and semi-detached homes. Banks are also exercising stringent lending, mitigating risk of loan defaults in a tightening economy that is characterized by inflation and higher taxation.
Improved Infrastructure
Among satellite towns, those with the best access infrastructure (Thika, Syokimau, Ngong, Limuru, Juja) continue to outperform the market average. Land prices in satellite towns grew at almost 7 times the rate of land in Nairobi mainly due to improved infrastructure and affordability opening it up to a wider demand base.
Ongata Rongai was a front runner in quarterly price growth at 8.2 per cent, displacing Q2 leader Thika as developers anticipate improved access because of the dualing of the Bomas-Rongai-Kiserian Road.
Ngong has the highest increase at 21.3 per cent over the year to September, followed by Thika at 18 per cent and Athi River at 13.5 per cent.
“Improved road infrastructure has remained price growth in Ngong, Mlolongo, Athi River, Thika and Syokimau by attracting both commercial and residential developers to the satellite towns with the benefit of easing the strain of congestion in the city while providing more affordable housing solutions on the city fringe,” she added.
Langata remained the suburb with the highest land price growth on higher density development potential, easy access to major economic nodes, and lower land price per acre compared to neighbouring suburbs.
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