It has been more profitable to sell — rather than rent — apartments, standalone houses and town houses in the high-income neighbourhoods in the last five years. This trend is unlike that of the low-end of the property market
, where houses are built predominantly for rent.
According to the HassConsult Composite Letting Index contained in the recently released HassConsult Property Index — the closest research Kenya has to a fully fledged property index — rentals in the high end market doubled between 2001 and 2006, only to stagnate between then and now.
According to the report, average rentals for high-income neighbourhoods rose by a meager 0.1 per cent in the last quarter after falling 6.8 per cent last year. This is in unlike the period between 2001- 1—6/7, when rentals in the same neighborhoods went up 2.48 times.
flat prices
"Both trends of nearly flat rental prices come as consumers are pressed by rising inflation across food, school fees and consumer goods," said Farhana Hassanali of HassConsult. "In this, rents now represent a single island of price stability, being the only item in the household bill that is not spiraling upwards."
The drop in rentals followed another 2.4 per cent fall in the asking rentals for townhouses and maisonettes, which was again offset by a 1.3 per cent rise in asking rentals for apartments and a 0.3 per cent rise in the asking rentals for standalone houses.
Stark contrast
The trend reported by HassConsult for the high-income housing segment is in stark contrast to the low and middle income neighbourhoods, where rents have, in some instances, increased ten times over a similar period.
"Traditionally, low income neighbourhoods experience the highest rental hikes as they are where housing shortage is most acute, and are the population that spends the highest proportion of income on rent," said Reginald Okumu of Arc Consultants, a property firm.
According to the findings, the average rent for a four-six bedroom house at the high end is Sh145,000, while a one- to three-bedroom rent is a maximum of Sh55,000.
Compared to the low and middle-income segments of the economy, rents have risen to as high as Sh45,000 for a three-bedroom standalone house, as opposed to Sh20,000 just two to three years ago.
General shortage
"Rentals have traditionally consumed a higher proportion of household incomes in Kenya than is normal globally, reflecting the general shortage of housing. But that proportion of spending on rental now looks to be shifting downwards, possibly permanently, on the back of a decade of greater housing supply," said Hassanali.
Going forward, analysts say that while other sectors of the economy have already taken a hit and adjusted their prices to reflect the current economic realities, the real estate market is yet to adjust to the rising oil prices , the weakening shilling and the rising cost of building materials.
"This situation is likely to get more strained in the coming months, with developers seeking to cover costs and buyers entering the market with tighter budgets, and could see some patchiness in pricing and some delays in completions," she added.
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