Kenya’s property market slows as uncertainty rattles investors

Political uncertainty is taking its toll on the Kenyan property market and the slowdown is likely to continue through the rest of the year, according to a new study by equity firm Cytonn.

The worst affected market segment is the residential property, which is forecast to slow down to 3.2 percentage points this year on dwindling demand as investors hold on to their money as they await the outcome of the hotly contested presidential election, the report by Cytonn Real Estate said.

The company projects total returns to average 9.4 per cent compared to 12.6 percent last year, which can be attributed to slower price increase.

“This can be attributed to investors shying away from long-term investments as they awaited the outcome of the 2017 elections,” Cytonn said in the Nairobi Metropolitan Residential Report 2017, which noted that property prices rise has nearly halved this year to 3.8 per cent from 7.4 per cent last year.

Investors who capitalize on rental houses are, however, expected to see some marginal growth in their incomes, with Cytonn projecting average rental yields of 5.6 per cent up from 5.2 per cent last year.

The firm attributes the growth to sustained demand for rental units compared to units for sale.

Although Cytonn expects the market to stabilize through 2018 after the elections, there will be “price stagnation in selected markets” due to excess supply.

Investors in detached units in the mid-end markets are expected to reap the highest returns of 11.1 per cent on average, followed by apartments in upper mid-end at 10.5 per cent.

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Owners of detached units in lower mid-end segment will reap 9.5 per cent, those of lower mid-end units in the outskirts at 9.2 per cent, while returns for detached units in high-end markets are estimated at 7.5 per cent.

Cytonn has identified Kilimani and Ridgeways as estates offering the best opportunity for developers of residential apartments, with Juja and Runda Mumwe as the best bets for developers wishing to put up detached units.

Kenya’s General Election was held on August 8, but the Supreme Court on September 1 annulled the re-election of President Uhuru Kenyatta on grounds that the polls were not held in accordance with the Constitution.

October 26 has been gazetted as the date for a repeat of the presidential poll, pitting Mr Kenyatta and Nasa leader Raila Odinga.

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