Owners of property in prime residential rental market are reaping from a weak shilling, while lack of stock of such properties is also working in favour of the owners as they demand higher rents, the latest Knight Frank survey reveals.
- The prime residential market in Kenya is driven by expatriates and high net worth individuals.
- Depending on the location, apartment features and exclusivity of the neighbourhood, prime monthly rents for a three-bedroom apartments range between KES 140,000 and 220,000.
- Four- and five-bedroom houses tend to be in the range of KES 300,000 and 500,000.
The market registered an annual appreciation of 5.85 per cent to the year ended 2023.
“This was mainly attributed to the appreciation of the dollar against the Kenya Shilling that implied a net increase in disposable income for expatriates implying increased demand. Additionally, there is a severe lack of prime residential stock, a situation that has allowed landlords to demand higher rents,” Knight Frank notes in its second half 2023 Real Estate Market update.
“Due to the exclusivity of the prime residential market, and its tendency to often withstand market shocks better than most real estate classes, it is expected that this sector shall continue to remain vibrant and perform well.”
Sales Slow Down
The prime residential sales market registered a 0.3 per cent appreciation over the review period, and a 2.45 per cent improvement over the last 12 months.
- Though positive, the rate of appreciation has declined from an annual appreciation rate of 4.14 per cent registered in 2022.
- The marginal appreciation in value is largely attributed to depreciation of the Kenyan shilling, and a calm business environment as the country got over the election period, and post-election jitters that occurred in the first half of 2023.
- Kenya, like the rest of the world, is under challenging economic conditions, resulting in a slowdown in the residential sales market.
Completing sale agreements is taking longer, a situation that is exacerbated by extended turnaround times in the Ministry of Lands, Housing, and Urban Development. Land stakeholders continue being frustrated with the title conversion process.
Additionally, the depreciation of the Kenyan shilling is impacting sellers’ property valuations, with buyers feeling that quoted prices are beyond market value. This has led to further delays in finalising sales.
To mitigate against the declining Kenyan shilling, sellers are increasingly listing their properties in major global currencies, mainly USD, Euro, or the British Sterling Pound. The sellers accepting payments in major world currencies have been able to secure buyer-friendly deals, as sellers prefer such currencies to offset potential losses caused by the Kenyan shilling’s diminishing purchasing power against these currencies.
According to Mark Dunford, CEO of Knight Frank Kenya, due to the exclusivity of the prime residential market, and its tendency to often withstand market shocks better than most real estate classes, it is expected that this sector shall continue to remain vibrant and perform well.
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