NAIROBI, Kenya, Jul 14 – Housing prices in Kenya experienced a slight cooling down between the months of April and June due to slow economic growth, according to a property market report.
Results from the Hass Consult Residential Price Indices for the second quarter of 2011, show closing prices falling by two percent after a 1.8 percent growth in the first quarter.
Speaking on Thursday, Hass Consult Property Director Farhana Hassanali said despite a steady progression in sales, sellers were becoming more realistic in their asking prices with a 1.9 percent increase in the second quarter, compared to a 4.4 percent jump in the first quarter.
“Buyers are not being pressured into buying and they’re holding off from purchasing property as they search a little more for bargain buys, unwilling to pay higher prices. This is a bit of a gentle landing for house prices, particularly notable for standalone houses,” she said.
The second quarter saw asking prices for stand-alones rise by 1.5 percent, while asking prices for townhouses and apartments increased by 2.9 percent and 2.0 percent respectively.
“We saw relatively few issues of property sales actually delayed and there continues to be a pipeline of buyers, but we are no longer seeing the kind of pent-up demand necessary to keep pushing prices significantly higher,” Ms Hassanali said.
The market, she added, is currently absorbing new build at the value end of the market in off-plan purchasing, noting that fewer buyers are upping their offer prices to secure properties.
The average rent for an apartment is currently Sh57,544 up from Sh21,638 in December 2000.
Asking prices in the rental market were static between April and June, up by an average of 0.1 percent from the previous quarter, with a notable margin between asking prices and final closing prices.
Ms Hassanali said the trend of flat rental prices could reflect a long-term adjustment in rental returns on rented properties.
“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,” she observed.
However, the flattening of house sale prices, she fears, represents a more unstable situation that could create a potential disruption to construction activity.
“There is some time lag on developers being impacted by rising oil prices, and in building materials, but we are seeing a growing number of cases where developers are approaching buyers for higher prices, because their profits having been eroded or now completely removed,” she said.
With developers seeking to cover costs and buyers entering the market with tighter budgets, Ms Hassanali says, that the market could see inconsistency in pricing and delays in project completions.