Developers and homeowners in affluent suburbs of Nairobi, such as Runda and Spring Valley, have slashed asking prices for properties in an effort to attract buyers. This trend comes as new homebuyers are increasingly looking to satellite towns, leading to tightened liquidity in the upmarket areas. A recent quarterly survey conducted by realtor HassConsult reveals that in the 12 months leading up to September, developers in two-thirds of the surveyed suburbs experienced a drop in the cost of houses, resulting in an average decrease of 3.7% in sales prices.
The decline in property prices can be attributed to various factors. The tough economic environment, characterized by rising interest rates and stringent lending conditions, has contributed to reduced demand for real estate. Additionally, the tax on proceeds from property sales has tripled to 15% within the same period, further impacting purchasing power. Elevated inflationary pressures and increased statutory deductions on pay slips have also eroded household affordability.
The survey indicates that standalone homes in Runda experienced the sharpest decline in prices, dropping by 10.9%, followed closely by Spring Valley (10.6%), Kitisuru (9.5%), and Westlands (9.4%). The demand for detached and semi-detached homes, which are predominant in the own-to-occupy segment of the real estate market, has been particularly affected by higher interest rates and stringent lending practices.
While developers in three out of the 15 surveyed suburbs raised house prices above the average inflation rate of 8.34% for the 12-month period, satellite towns surrounding Nairobi witnessed an increase in demand. This growth can be attributed to improved infrastructure linkages with the city, as well as amenities such as hospitals and schools. For example, Ngong town experienced the highest increase in house prices at 14.7%, followed by Ruiru (11.9%), Kiambu (11.8%), and Tigoni (10.8%). In terms of land prices, Ngong also led with the fastest rise at 21.3%.
Nairobi’s property market has struggled to recover from the economic impact of the Covid-19 pandemic. New house buyers have reduced their orders due to income and job losses, cautious lending practices by banks, and a preference for maintaining cash amidst growing economic uncertainty. Detached and semi-detached housing in Nairobi has become a buyer’s market, leading developers to shift their focus to apartments. Demand for apartments has been steadily increasing over the past decade, with a market share of 64.4% in 2020 compared to 23.5% in 2001.
In conclusion, developers and homeowners in upmarket Nairobi suburbs have been forced to reduce prices in order to attract buyers amidst tightening liquidity. The challenges posed by a tough economic climate, including rising interest rates, stringent lending conditions, and increased taxation, have resulted in a decline in property prices. Conversely, satellite towns near Nairobi have experienced a rise in demand due to improved infrastructure and amenities. Nairobi’s property market continues to face obstacles in its recovery from the economic fallout of the Covid-19 pandemic.