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Coronavirus could worsen real estate sector’s perfomance amid slow growth

NAIROBI, Kenya, Apr 11- Kenya’s real estate sector recorded slow growth in the first three months of 2020, a situation that could worsen due to the coronavirus pandemic, a new report has revealed.

Fresh data from Cytonn Investment’s real estate arm attributes the slow to uncertainties in approval of laws, difficulty in accessing bank loans and a general slowdown in spending power among buyers.

“The spread of the Coronavirus took its toll on key sectors including the tourism sector, which saw hotels suspending operations and this effect is expected to trickle down to the overall real estate, particularly commercial real estate amidst the current global economic crisis,” reads the report.

The disease has so far claimed 7 lives in Kenya with 191 infections.

During the period under review, the retail sector, on the other hand, recorded a 0.1 percent for the year 2020 contributed by a drop in rental yields to 7.7 percent, from 7.8 percent it had registered in 2019.

Average yields improved marginally under the residential and commercial office sectors to stand at 5.2percent and 7.8 percent, compared to 5.0 percent and 7.5 percent recorded in 2019 respectively.

Meanwhile, apartments recorded the highest rental yields to standing at 8 percent compared to the residential market.

Research Analyst at Cytonn Wacu Mbugua said the demand of apartments saw investors registering high profits which stood at 6.8percent, 6.7percent and 6.3 percent respectively, due to the increased demands in areas with the highest population of youths.

“Apartments continued to be popular in the market largely driven by the growing middle-class bracket on the demand side and need for profit maximization for developers on the supply side especially in light of rising land prices,” said Wacu Mbugua.

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“As per the report, Langata, Athi River, Kilimani and Ruaka registered the highest returns to investors respectively, boosted by constant demand from Nairobi’s young and working population,” she added.

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