Rents flat as Nairobi luxury property fails to excite market

Money Markets

Runda Estate in Nairobi. Rents in Nairobi’s prime areas did not increase in the first three months of 2015. PHOTO | FILE 

By JOHN GACHIRI

In Summary

• Budget limits by multinational corporations, embassies and NGOs is said to be one of the major reasons for the freeze in rents.

Rent for properties in Nairobi’s luxury market has remained flat as prime clients such as multinational corporations are reluctant to pay landlords more, property consultancy Knight Frank said.

The Knight Frank Prime Global Rental Index shows that rents in Nairobi’s prime areas, with a monthly average rent of Sh427,000 ($4,270), did not increase in the first three months of 2015.

The index looks at the top five per cent of the market across 18 major cities. For Kenya, research analysts at Knight Frank consider a luxury property to be a four-bedroom executive house in a prime location.

Knight Frank Kenya managing director Ben Woodhams said budget limits by multinational corporations, embassies and NGOs is one of the major reasons for the freeze in rents.

“Expatriate staff have housing budgets, beyond which they must seek approval from their head offices for extra rental expenditure,” said Mr Woodhams in a statement.

Insecurity has also resulted in tenants preferring houses in gated communities over stand-alone units.

Knight Frank, however, said it expected rents would rise as more expatriates follow multinationals that are setting up shop locally and increased activity in the mining, oil and gas industries.

“These will also likely boost uptake of luxury residential rentals,” says the Knight Frank Prime Global Rental Index.

A similar report by real estate consultancy Hass Consult, however, said there were marginal increases in Kenya’s property market over the first three months of the year.

The Hass Composite Letting Index shows that rents in Kenyan suburbs increased by 1.4 per cent over the first three months of the year.

“Rents rose in quarter one across all segments, but most strongly for semi-detached houses at 2.2 per cent, however, overall rent rises slowed down, subdued by stable asking prices for apartment rents, up just 0.4 per cent in quarter 4 2014,” said the Hass report for the first quarter.