HassConsult released the Hass Property Sales and Rental price indices for the third quarter of 2023, revealing a drop in average sales prices of 1.1 percent in the quarter, resulting in a 3.7 percent drop in the year to September 2023.
Prices of detached and semi-detached houses fell by 1.7 percent and 0.9 percent in the quarter, while apartments recorded a 1.5 percent growth in prices as buyers look for value in a challenging economy.
Higher interest rates impacting market liquidity negatively affected demand for own-to-occupy real estate during the quarter, largely constituted of detached and semi-detached homes.
Banks are also exercising stringent lending, mitigating the risk of loan defaults in a tightening economy that is characterized by inflation and higher taxation.
The rental market, in contrast, experienced a price growth of 0.4 percent on average over the quarter, backed by the outperformance of apartments compared to detached and semi-detached units.
Apartment rental prices grew 3.2 percent in the quarter, with affordability a key consideration, while prices for detached and semi-detached houses fell 0.7 percent and 0.4 percent respectively. Apartments therefore continue to offer the best value for money for investors, both in rental yields and capital gains.
“The apartment market is seeing a price resurgence backed by renewed demand for inflation-beating investment assets in a period where the Kenya shilling is losing value,” said Ms. Sakina Hassanali, Head of Development, Consulting and Research at Hass Consult.
Suburbs such as Riverside, Langata, and Westlands, which are near the city’s main economic hubs performed best in rental price growth of between 1.5 percent and -3.4 percent.
Among satellite towns, those with the best access infrastructure (Thika, Syokimau, Ngong, Limuru, Juja) continue to outperform the market average. Compared to other asset classes, overall property rental returns have outperformed the equities market on an annual basis, but trail the returns on offer on Treasury bills.
“Apartment returns of 5.9 percent in the year to September are however higher than those in savings, which averaged 4.05 percent by the end of August,” added Ms. Hassanali.
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