Prices of palatial Nairobi residences fall by 6.5pc

A luxury home on the outskirts of Nairobi. FILE PHOTO | NMG 

By PATRICK ALUSHULA
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Summary

• This is the fastest reduction in values in a 12-month period that Nairobi has ever recorded since the index commenced recording data.
• The latest fall translates to cumulative 9.2 per cent fall in prices of Nairobi luxury homes over the last three years.

Prices of prime residential properties in Nairobi slid by 6.5 percent in the 12 months to March 2019 thanks to a glut, the latest Knight Frank Prime Global Cities Index (PGCI) has shown.

This is the fastest reduction in values in a 12-month period that Nairobi has ever recorded since the index commenced recording data.

Head of Agency at Knight Frank Kenya Anthony Havelock says the realtor expects further softening.

“Data tends to lag the market and we believe we will see further drops in the coming months as the market has continued to soften,” said Mr Havelock.

“Owing to the high values of the properties tracked and the current supply levels, plus the ongoing credit crunch, transactions will remain few and staggered unless vendors become realistic on pricing."

In the three months to March, prices softened by half a percentage point, marking the eighth consecutive quarter since the second quarter of 2017 that prices have dropped or remain unchanged in a given three months.

The property realtor said the trend has been occasioned by continued oversupply, with large numbers of new properties coming into the market, and relatively few transactions in the high-end residential market.

The latest fall translates to cumulative 9.2 per cent fall in prices of Nairobi luxury homes over the last three years, since peaking in the first three months of 2016.

However, values are still about 38 per cent higher than in 2010, representing decent capital gains in the high-end market segment.

The price in first quarter saw Nairobi drop in ranking to 42nd out of the 45 locations tracked by the global index, putting it in the league of 10 other cities that recorded a decline in luxury property prices the year to March.

Cape Town, the only other African city in the PGCI, is ranked 19th with a 2.1 per cent increase in the 12-month period and a marginal 0.1 per cent price decline in the quarter.

Knight Frank says the build-up in supply has also resulted in elevated vacancy levels in Nairobi’s rental segment, piling pressure on rents in the top end of the market with further reductions in the works.