Land prices fall, rents up after easing of lockdown

Residential Apartment in Nairobi. FILE PHOTO | NMG

By JAMES KARIUKI
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Summary

• HassConsult, which conducts a quarterly property pricing index in Kenya, said Thursday that land prices dropped 0.94 percent in quarter three, compared to a growth of 0.22 percent in a similar period last year.
• This is the third quarterly drop in a row on reduced demand, defying the recovery of the economy after a phased reopening of the country from a Covid-19 lockdown on July 6.
• The easing of coronavirus restrictions has seen firms stop layoffs and raise the number of workers on their payroll, driven by improved cash circulation amid re-opening of businesses and schools

Land prices have dropped further in Nairobi and the surrounding counties of Kiambu, Kajiado and Machakos in the three months to September despite the ongoing recovery from coronavirus hardships that lifted rent.

HassConsult, which conducts a quarterly property pricing index in Kenya, said Thursday that land prices dropped 0.94 percent in quarter three, compared to a growth of 0.22 percent in a similar period last year.

This is the third quarterly drop in a row on reduced demand, defying the recovery of the economy after a phased reopening of the country from a Covid-19 lockdown on July 6.

The easing of coronavirus restrictions has seen firms stop layoffs and raise the number of workers on their payroll, driven by improved cash circulation amid re-opening of businesses and schools.

The improved business environment has eased pressure on landlords to cut or defer home and office leasing costs.

HassConsult said that on average rents increased 2.5 percent in the three months to September, compared to a growth of 0.2 percent in the quarter to June and 0.9 percent in the same period a year earlier.

But home prices rose marginally by 0.3 percent from a drop of 0.2 percent in the quarter to June and 0.9 percent in the three months to September last year.

Housing has been one of Kenya’s fastest growing sectors over the last decade, fuelled by a growing middle class, with returns from real estate outpacing equities and government securities.

This fuelled a boom in land prices, which have increased nearly four-fold in Nairobi and surrounding satellite towns like Kiambu, Ongata Rongai and Kitengela.

The feverish rise in house and land prices has led to a bubble, setting the stage for multi-billion shilling loan defaults from property developers who had pegged their bets on Kenya’s real estate.

marginal rise

The recent marginal rise in land and fall in home prices hit property developers and speculators while offering a bargain to investors with money for real estate.

“Kenya has weird landlords who would rather retain empty units than drop prices to attract or retain tenants,” said Sakina Hassanali, head of property development consulting and research, at HassConsult.

“That is the reason rental units continue to attract high prices as tenants are looking at units they can afford.”