The Kenyan real estate market has seen its fair share of ups and downs over the past few years. The latest data from HassConsult reveals some interesting trends for the third quarter of 2023. The report indicates that the market continues to be influenced by various economic factors, including inflation, higher taxation, and fluctuating interest rates. In this article, we’ll delve into the key findings of HassConsult’s latest property sales, rental, and land price indices and analyze what these trends mean for investors and homebuyers in Kenya.
Property Sales: A Mixed Bag
The third quarter of 2023 brought mixed results for property sales in Kenya. The average sales prices dropped by 1.1 percent during the quarter, resulting in a 3.7 percent decrease in the year-to-year comparison. Detached and semi-detached houses were hit hardest, with price decreases of 1.7 percent and 0.9 percent, respectively. On the other hand, apartment prices bucked the trend with a 1.5 percent growth, showing that buyers are seeking value in these more affordable housing options.
One of the primary factors impacting the sales market is the rise in interest rates, which has negatively affected market liquidity, particularly for own-to-occupy real estate. Detached and semi-detached homes have seen a drop in demand due to these higher rates, as well as banks exercising stricter lending practices to mitigate the risk of loan defaults. These challenges have created a more challenging environment for sellers in the sector.
Rental Market: Apartments Lead the Way
In stark contrast to property sales, the rental market experienced growth during the third quarter of 2023. On average, rental prices increased by 0.4 percent, driven by the strong performance of apartments compared to detached and semi-detached units. Apartment rental prices saw a significant boost, growing by 3.2 percent during the quarter. This growth is attributed to the affordability factor, making apartments a more attractive choice for renters.
Apartments are proving to be the best value for money for investors, offering not only strong rental yields but also the potential for capital gains. In a time when the Kenyan shilling is losing value, apartments have emerged as an inflation-beating investment option, attracting investors looking for stability.
Regional Variations in Rental Growth
Suburbs close to the main economic hubs, such as Riverside, Langata, and Westlands, showed the strongest growth in rental prices, ranging from 1.5 percent to -3.4 percent. Among satellite towns, those with excellent access infrastructure, including Thika, Syokimau, Ngong, Limuru, and Juja, continue to outperform the market average. These areas are attractive to both renters and investors due to their accessibility and affordability.
Overall, property rental returns have outperformed the equities market on an annual basis, though they still trail the returns available on Treasury bills. Apartments, in particular, have shown impressive returns, with yields of 5.9 percent in the year leading up to September 2023, making them a solid choice for investors seeking to beat inflation.
Land Prices: Recovery in Progress
HassConsult also released data on land prices in the third quarter of 2023. Land in Nairobi’s suburbs increased by 0.4 percent in the quarter and 0.8 percent over the year, indicating signs of price recovery. This recovery is largely attributed to a resurgence in development activity following the COVID-19 pandemic.
Notably, land in Nairobi’s satellite towns experienced more rapid price growth, increasing by 2.7 percent in the third quarter and 6.3 percent annually. The growth in satellite towns is almost seven times that of land in the city, driven by improved infrastructure and affordability.
Regional Leaders in Land Price Growth
Ongata Rongai took the lead in quarterly price growth at 8.2 percent, displacing Thika as the leader from the previous quarter. The anticipation of improved access due to the resumption of the Bomas-Rongai-Kiserian road dualling project has driven this growth. Ngong led the annual increase at 21.3 percent, followed by Thika at 18 percent and Athi River at 13.5 percent.
