House prices in Nairobi’s suburbs stagnated last year, owing to an overall drop in the property costs due to lower demand tied to the economic fallout of Covid-19.
HassConsult, which conducts property pricing index in the country, said on Wednesday that overall housing prices in the city increased by a mere 0.17 per cent largely due to a 1.2 per cent price decline in the three months to December.
It attributed the stagnant growth to a decline in prices for apartments by an average 1.8 per cent in the last quarter and 4.6 per cent over the year.
The cost of homes in upmarket Kileleshwa and Kilimani suburbs, which accounted for 45 per cent of all properties on sale, registered the biggest decline in the year by 9.9 per cent and 8.6 per cent respectively.
The firm linked the price fall to high land prices amid a pandemic economic fallout – which has led to job losses and pay cuts – as well as cuts on bank loans and mortgages.
“We have seen the Kilimani and Kileleshwa markets move from steep price growth, in all ways a price boom, until it reached levels that buyers could no longer reach with the roadblocks in mortgage finance and reduced liquidity from a global pandemic,” said Sakina Hassanali, head of property development consulting and research at HassConsult.
This, she said, forced property developers to put up smaller apartments with lower price tags resulting in an oversupply in the market.
“While smaller apartments dominate the new build market in Kilimani and Kileleshwa and provide middle-income housing at lower ticket prices, the sheer volume of new stock created rental price vulnerability for larger and older stock during the economic slowdown caused by 2020’s global pandemic, resulting in rental price corrections.”
Apartments prices in Riverside, Parklands and Lavington also declined by 7.1 per cent, 6.0 per cent and 3.1 per cent respectively.
In Langata, property prices dropped by 3.1 per cent last year despite a rise of 2.3 per cent in the three months to December after the easing of Covid-19 containment measures.
But, detached and semi-detached houses defied the trend, recording a 0.03 per cent and 2.3 per cent respectively in the 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.