Apartment Rents Fall as Market Reacts to Increased Supply

Overall, asking sales prices for residential property rose by 3.6 percent in the final quarter of 2015, maintaining the market’s upward cycle after the fall in Q4 of 2013.

The sharpest rise was in asking prices for semi-detached houses, up 4.3 percent on the previous quarter and 18.4 percent over the year in 2015.

Rents for all properties fell by 0.1 percent in the final quarter of 2015 with apartments recording the highest fall of 2.3 percent.

The fall in rents for apartments has led to the decline in rental yields in the category to 6.29 percent by the end of December 2015 compared to rental yields of 7.14 percent recorded in the same period 2014.

Annual house prices over the year 205 rose by 11.9 percent in Nairobi’s satellite towns while rents rose by an average of 9 percent.

Price growth was subdued within Nairobi’s suburbs with sales prices up 8.7 percent and rents up 5.8 percent on a year earlier.

The sluggish upward rent movement in Nairobi’s suburbs was attributed to an apartment oversupply leading to a rent correction in the segment.

HassConsult has today unveiled property price trends for the fourth quarter of 2015 showing an upward growth in property prices as well as a drop in asking rents in the last three months of the year.

The fall in rents was driven by a 2.3 percent drop in asking rental prices for the apartments.

“Developers are under pressure from the increased scarcity and surge in land prices to maximize land usage hence a majority prefer to construct high density apartments. This has led to an increased supply of apartments over the last five years.” Said Ms. Sakina Hassanali, Head of Research and Marketing at HassConsult.

There are almost five times more apartments in the market than town houses as well as maisonettes combined.

“In December alone, apartments took up to 59.6 percent of the rental market,” Ms. Sakina explained.

The table below shows change in sales in all the properties.

Article by Juma Fred.