In filling Nairobi’s many top-end residential estates, the flight of international residents is now being felt in the real estate, a report has revealed.
According to the report released by Hass Consult, economic growth and consumer demand have also affected tax revenue growth and donor funding during the decade-long ‘great recession’ that has followed.
“This steady attrition in numbers was accelerated last year in the new government drive curbing work permits. This triggered a new uptick in international departures, which by the first quarter of 2019 had resulted in significant falls in the sales prices and rents of top-end detached houses, which fell by 4.4 per cent and 4 per cent respectively in the first 12 weeks of the year,” said Sakina Hassanali, Hass Consult’s Head of Development, Consulting and Research.
According to Ms Sakina, the firm foresees some continued downwards pressure in this segment until the international economy improves or Kenya initiates policies to attract renewed growth in international residency.
However, while the top end of the market has been affected by global trends and domestic policies, the other strong mover has come in apartment rentals.
But the other principal strand of this market has been internationals, with Nairobi positioned as one of the four ‘poles’ of Africa, as a centre of diplomatic and commercial activity. This has brought incoming, foreign top management to the African and East African headquarters of European, Asian and American multinationals. It has also brought an abundance of diplomatic staff, and donor-funded staffing, as well as pools of social entrepreneurs and business adventurers.
There has however been a steady downgrading of diplomatic and donor-funded postings since the world financial crisis of 2008, with many western governments running austerity programmes to cover the debt funding for their support of the financial system at that time.
Starting with the top end, it is a fact, and often commented on, that the primary focus for developers over the last two decades, and particularly in the 1990s, and the decade from the year 2000, was at the very top end of the residential market. Thus, today entire suburbs, such as Muthaiga and Karen, Nyari, Runda and Spring Valley, are filled with large detached houses, and lived in by the wealthy.
The report however noted that in filling thousands of large stand-alone houses and villas one has to reflect on the nature and make-up of the market – both for owners and for residents for such homes.
These certainly include the expanding Kenyan elite: CEOs, top politicians, from governors to cabinet secretaries, private secretaries and company directors.
In Kenya’s ever more sophisticated land and property market, the future of all prices is no longer powerful growth. But, as ever, pricing remains a remarkable pointer to unmet demand and shortages and still the clearest guide available to the most strategic development going forwards.
Hass Consult also reported a continuing shift to growth in the Kenyan property sector’s mid-market, as the top-end market adjusts to international pressures and tightening budgets.
Unveiling its property sales and rental price indices for the first quarter of 2019, Hass Consult reported that the strongest price growth in the first 12 weeks of the year was in apartment rents, which rose by 4.9 per cent in just three months, taking the year-on-year growth to 19.6 per cent.
“However, returning to building after the decade of slowdown in apartment pricing would require close attention to location and gaps in the market. “The Kenyan property market has matured, and the only apartments that will now sell and fill quickly are those where developers have properly researched the market and constructed accommodation that fills a proven and unmet need,” said Sakina.
In this, Kenya may also now start to see a new trend in the more widespread conversion of large detached houses into multiple residences. Developer construction over the last 30 years has been dominated by the building of large homes on individual plots, in estates such as Spring Valley, Runda, and Nyari, and areas such as Muthaiga and Karen. However, a substantial proportion of these homes were occupied by international residents. As governments globally have continued to curb foreign spending following the extra debt loading they took on during the financial crisis of 2008, many international and aid-funded operations have been retrenched.
At the same time, changes to Kenya’s work permit regime marked a sharp exodus of internationals in 2018, leading to the vacating of many larger properties. As a result, the prices of detached houses for sale fell by 4.4 per cent in the first quarter of 2019, while rents fell by 1 per cent, as owners and sellers cut prices in an effort to sell or refill. Only in the mid-market of town houses has growth remained solid and inexorable, with sales and rentals having slowed marginally, but remaining robust. In the first quarter of 2019, rental prices on town houses rose by 1.7 per cent, taking year-on-year growth to 11.1 per cent, while sales prices rose by 1.3 per cent, taking year-on-year growth to 7.9 per cent.
“Each quarter we see ever more marked evidence of the relative strength and demand for properties in the middle and lower market, versus the clear slowdown at the top end of the market,” said Sakina.
