Nairobi builders slash house prices as enquiries dry up

Cracks are forming in the real estate market of Nairobi, forcing developers to offload homes at a discount in a move that could spark angry demands from homeowners who paid full price for units.

House price growth has slowed over the past couple of months in the wake of low access to credit, uncertainties in building approval laws, and a weakening purchasing power among potential buyers.

Analysts say demand for housing remains subdued by oversupply in some segments as well as low access to credit among would-be-buyers.

“Demand has slowed down and developers will have to look for new pockets of value, especially in the lower end of the market,” Johnson Denge, Cytonn’s senior manager for regional markets, said in a recent interview.

In the past few days, the struggle has become more apparent in Nairobi. High profile builder HF Group has priced some of its city houses at a 30 per cent discount, while Soil Merchants, and Edermann Property have been offering hefty discounts on some of their ongoing developments.

READ: High-end homes glut hits Nairobi property market

According to HF Group, investors have up to May 31 to buy 700 houses located in 11 of its city projects (eight of which are complete, with the rest nearing completion) under a three-month campaign dubbed Shika Nyumba na HF. 

“The promotion makes existing properties more affordable for local and diaspora buyers. It is an opportunity for cash buyers as well as those seeking to take a mortgage funded by HF,” HF Group CEO Robert Kibaara said in a statement.  

Completed developments on offer include Koibatek Apartments, Evergreen Valley in Utawala, Woodley Springs Apartments, Kahawa Downs Apartments, Warira Court, Sigona Heights Maisonettes, and Komarock Heights Apartments.

READ: Banks descend on builders as loan defaults hit real estate

Ongoing developments include Richland Pointe on Kamiti Road, Precious Gardens Phase II – set for completion in September – and Clay City Phase IA, which is scheduled for completion next January.

While HF Group presents the huge discounts as a regular marketing campaign, there are fears that more property developers may be forced to make similar moves in coming months to push up sales.

The problem with this strategy, as has been proven in China, is its potential to spark social unrest when existing homeowners protest against price cuts offered by developers to new buyers.

Street protests

In October last year, for example, Garden Holdings, China’s biggest housing developer by sales, slashed prices of its homes by up to 30 per cent igniting violent street protests as angry buyers who paid the full price smashed the showrooms of one of its projects in Jiangxi – demanding a refund.

Similarly, anger spilled in the streets of Xiamen city in Fuijian province when Vanke – China’s second largest homes developer – slashed the price of one luxury villa by Sh30 million (2 million yuan), having sold for more than Sh75 million in October 2017.

Vanke was eventually pressured to pay out Sh15 million (a million yuan) in compensation to 100 existing home owners, although it insisted that the refund it was offering was for a change in design.

Similar protests have been reported in other cities including Guiyang, Shangrao, and Hangzhou.

Join 15,000+ pros getting our weekly digest of news and insights.