Sakina Hassanali, head of development consulting and research at HassConsult. FILE PHOTO | NMG
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Runda, Spring Valley cut house prices 10pc as buyers flee to satellite towns
Developers and homeowners in upmarket Nairobi suburbs including Runda and Spring Valley have cut asking prices by double-digit rates to attract buyers amid tightening liquidity, as new home buyers flee to satellite towns, a quarterly survey has revealed.
Data by realtor HassConsult shows developers in two-thirds of surveyed suburbs took a hit on the cost of houses in 12 months through September, resulting in an average drop of 3.7 percent in sales prices.
This came against a backdrop of a tough economic setting characterised by rising interest rates amid stringent lending conditions with tax on proceeds on the sale of property tripling to 15 percent in the period.
Household purchasing power has also been eroded by elevated inflationary pressures and increased statutory deductions on pay slips that have largely stagnated.
Standalone homes in Runda dropped at the fastest pace of 10.9 percent, closely followed by Spring Valley (10.6 percent), Kitisuru (9.5 percent) and Westlands (9.4 percent), the HassConsult data show.
“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,” researchers at HassConsult wrote in the quarterly report.
“Banks are also exercising stringent lending, mitigating the risk of loan defaults in a tightening economy that is characterised by inflation and higher taxation.”
The report, largely based on advertised prices, indicates that developers in three out of 15 surveyed suburbs raised house prices above the 8.34 percent average inflation in the 12-month review period.
These were those in Lang’ata where house sale prices went up by 10.3 percent, Kilimani (10 percent) and Nyari (8.5 percent).
In contrast, house prices in six out of 10 satellite towns rose above the average inflation for the period, signalling growing demand in towns near Nairobi with improved infrastructure linkages with the city and amenities such as hospitals and schools.
Property owners in Ngong town raised house prices at the highest rate of 14.7 percent in the year through September, followed by Ruiru (11.9 percent), Kiambu (11.8 percent) and Tigoni (10.8 percent).
Others with inflation-beating price increments were Athi River (9.2 percent) and Ongata Rongai (8.9 percent).
Developers in Limuru, however, cut house prices by 9.3 percent, while those in Juja cost 4.9 percent less than a year ago on average.
Ngong also posted the fastest rise in land prices at 21.3 percent followed by Thika (18 percent), Athi River (13.5 percent), Lang’ata (12.1 percent), Syokimau (11.9 percent), Loresho (11.1 percent), Spring Valley (10.6 percent) and Mlolongo (10.1 percent).
“Improved road infrastructure has maintained price growth in Ngong, Mlolongo, Athi River Thika and Syokimau by attracting both commercial and residential developers to the satellite towns with the benefit of easing the strain of congestion in the city while providing more affordable housing solutions on the city fringe,” Sakina Hassanali, head of development consulting and research at HassConsult, said in a statement.
Nairobi’s property market has struggled to recover from the economic fallout that followed the Covid-19 pandemic three years ago.
Industry data show orders by new house buyers have dried up largely due to income and job losses, cautious lending by banks, and families choosing to keep their cash in hand as they try ride out of the increasingly growing economic uncertainty.
Nairobi’s detached and semi-detached housing property has largely remained a buyer’s market, analysis of HassConsult data shows.
The cost of standalone homes in the year through September, for example, fell 3.1 percent compared with previous three months, while semi-detached ones contracted 8.6 percent. That has prompted return-chasing developers to switch to apartments where demand has been steadily growing in the past decade.
Apartments made up 64.4 percent share of the property market last year from 23.5 percent in 2001, leapfrogging detached houses whose share has plunged to 7.5 percent from 52 per cent in that period, according to HassConsult data. Developers of apartments raised sale prices by 2.1 percent in the 12 months through September, while rental prices went up 5.9 percent.
“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 Hassanali.
