Property Sale Prices Post Significant Recovery Despite Worsening Economic Conditions

HassConsult has released the Hass Property price index for the fourth quarter of 2023, revealing a marked reversal of property sale and rental asking price trends in the fourth quarter of 2023 up by 4.1 percent and 2.5 respectively after a year of price corrections.

This comes despite difficult economic conditions characterized by high inflation and a weakening currency. The elevated inflation, which averaged 7.7 percent in 2023, has meant reduced spending power for both home buyers and rental customers, while the weaker shilling raised input costs for developers which in high-demand suburbs had inflationary effects on property prices.

Despite this, the property market offered a total return (capital gains plus rental yield) of 8.3 percent in the fourth quarter of the year, illustrating renewed resilience in the face of challenging conditions that also included high-interest rates.

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“Although the weaker currency raises input costs for developers on ongoing and future projects, it makes the Kenyan property market attractive to foreign investment, buoying asking prices due to augmented demand from these investors,” said Ms. Sakina Hassanali, Head of Development, Consulting and Research at Hass Consult.

All 18 Nairobi suburbs recorded higher buying prices, led by Langata, Ridgeways, and Spring Valley, while in the satellite towns, Juja, Kitengela, and Athi River were top performers during the quarter.

The best rental returns on an annual basis were found in Ongata Rongai (15.4 percent), Athi River (15 percent) Kitengela (11.6 percent), Loresho (11.5 percent), and Nyari (9.9 percent). These returns competed favourably with those of Treasury bills and bonds whose net returns ranged from 9.5 percent to 17 percent in 2023.

Concerns about the safety of bonds due to the government’s high debt exposure however saw some investors seek alternative investments, which included property. The property returns from the best-performing satellite towns and suburbs also outperformed the NSE 20 Share Index, which had a return of -9.4 percent in 2023, and bank savings that averaged 3.8 percent in interest through the first 10 months of the year.

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