House prices rise as rents remain flat

October 22, 2014
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The total returns on let properties are now highest for semi detached houses at 16 percent followed by apartments at 13 percent and detached houses at 10 percent.
The total returns on let properties are now highest for semi detached houses at 16 percent followed by apartments at 13 percent and detached houses at 10 percent.

, NAIROBI, Kenya, Oct 22 – The housing market is moving into a renewed up – scale as property prices continue to soar flattening rent prices.

According to the Hass Property Index quarter three report 2014 the prices for property have gone up by 3.1 percent compared to the previous quarter and by 4.7 percent in the previous year.

The report indicates that the price rises were strongest for apartments that went up by 3.6 percent compared to the previous quarter followed by detached houses that went up by 3.2 percent and semi detached houses that rose by 2.4 percent.

Rent prices however slowed down sharply having had consistent strong rises in every quarter for the last three years as the overall charges recorded their lowest rate of quarterly increase in September 2014 at 0.4 percent.

“This pattern of flattening rents and rising sales prices is indicative of a housing market moving into a renewed up – scale. The market correction to rents that we flagged in 2011 as property yields moved to a low of around seven percent now appears to be reaching its conclusion and we are moving in to a new period of take-off in sales and investment returns,” said Hass Consult Head of research and Marketing Sakina Hassanali.

Hassanali said house price inflation which was particularly sharp in 2008 saw yields on property fall as rents stagnated, by 2011 this had seen some slowing of demand for properties as shorter term investments seeing house prices rises slow down and rents begin to surge upwards.

“Rents rose by more than 30 percent in the 18 months from January 2012, in a steep and continuous upwards trend but the growth has slowed down during 2014, to just 0.4 percent in the third quarter, “ she stated.

The total returns on let properties are now highest for semi detached houses at 16 percent followed by apartments at 13 percent and detached houses at 10 percent compared with a return of 8.6 percent on 91- day Treasury Bills.

She revealed that some developers are selling their land due to the capital gains tax that is set to be effected in January 2015. The capital gains tax will see developers pay five percent of the profit made from selling property.

“We have seen some developers selling their land, however it will not be something to worry about since the tax is really small value, developers are likely to hold their property,” she explained.

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