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Nairobi’s Prime Residential Prices Dip By 5 Points Due To Oversupply – Report

[PHOTO/ COURTESY]

House prices in Nairobi’s high-end market fell by 5.4 percent in the year ending September, the Knight Frank Prime Global Cities Index (PGCI) for quarter three of 2019 has indicated.

Values of prime residential real estate continued to drop as the market softens, albeit at a slower pace compared to the 6.7 percent in the year to June and 6.5 percent in the year to March, as buyers sought opportunities in a market segment still influenced by oversupply and distressed properties.

The values have been declining at varied rates year-on-year successively since Q3 2016. However, values are still more than 30 percent higher compared to Q4 2010, validating prime residential properties as a good investment for capital gains.

Read: Ksh38 Billion Mortgage Defaults Spell Doom For Real Estate Industry

According to the report, prevailing macro- and micro-economic conditions coupled with an oversupply in the segment have resulted in a sustained price correction. Subsequently, buyers have control of the market.

Anthony Havelock, Head of Agency at Knight Frank Kenya, predicts further reductions in the near-term until the macroeconomic and local situations improve.

The rising number of distressed properties in Nairobi has also affected prime residential values significantly, with lenders intensifying efforts to recover non-performing loans through sale of collateral.

Read: Cytonn Recognised As The Best Real Estate Developer In 2019

The price decline placed Nairobi 43rd among 45 cities covered by the index, demonstrating the ongoing pricing correction.

According to the report, the change in prime prices for all 45 cities averaged 1.1 percent in the year to Q3 2019, dropping from 3.4 percent in a comparable period last year and 4.2 percent in 2017, as the slowdown in global luxury residential markets gathered momentum.

Slower global economic growth (the IMF lowered its 2019 forecast from 3.3 percent to 3 percent in October), along with escalating headwinds – US/China trade relations, Hong Kong’s political tensions, a US presidential election in 2020 and the Brexit conundrum – are influencing global buyer sentiment.

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Francis Muli

Written by Francis Muli

Senior reporter at Kahawa Tungu, Muli has a passion for human interest stories. He believes in unearthing societal rots that have been hidden from the public eye. He has also carved himself a niche in writing business stories. He has worked for various organisations including Kenya Television Service, Business Today among others. Follow him on Twitter @FmuliKE.
Email: [email protected]

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