According to the Knight Frank Kenya’s managing director Ben Woodhams, the depressed demand and the subsequent fall in transactions volume was occasioned by cautious investors looking for properties that were capable of yielding good returns when put on sale.
Considering that the value of luxury property in Nairobi had grown by 40 per cent over the past five years, investors are seemingly cautious when committing their money into a property – although they are still willing to pay a premium for high-end homes that are placed in strategic locations.
Knight Frank defines a luxury home in Nairobi as any residential property priced from Sh80 million. Such homes are standalone units of high-end quality and sitting on at least half an acre plot in a posh city estate such as Muthaiga and Runda.
Rents for these units usually starts from Sh250,000 for a five bedroom apartment and Sh300,000 for town-houses and standalone units.
“The prime property segment is undergoing a normal property cycle,” Mr Woodhams said in a press statement.
Interestingly, rents for prime residences fell by 9.2 per cent in the year to June 2016 following an oversupply in the market.
Knight Frank had earlier said that despite the slowdown, the market was gradually growing although hard data on deals was not easily available.
“Data on deals in the prime residential segment remains scarce, but there are still some strategic, individual transactions happening albeit in low volumes,” said Anthony Havelock, head of agency at Knight Frank Kenya.
The sluggish growth is not surprising, says Nairobi-based investment analyst John Muthoga, because prices and demand predictably level after periods of appreciation.
“This was due to happen because we have been in an appreciating market since 2012, when Nairobi high-end homes recorded a 25 per cent price growth.
“It is natural that after four full years of appreciation you start to hit a point where buyers are priced out of the market,” said Mr Muthoga.
But according to Kenya Bankers Association (KBA), property prices in Nairobi rose by 2.2 per cent in the three months to September last year, while property firm Hass Consult says the prices rose by 1.2 per cent during the period under review.
“This is the fastest rise in prices on a quarter to quarter basis with the previous five quarters consistently below two per cent,” Jared Osoro, KBA director of research and policy said in a press briefing.
Mr Osoro noted that apartment sales accounted for nearly 60 per cent of all the transactions, a situation that was attributed to the demand for housing by the rising middle class Kenyans.
The pricier maisonettes and bungalows accounted for 24.3 per cent and 17.1 per cent of sales respectively.
According to Hass Consult, the 1.2 per cent property price rise – which is slower than the 4 per cent growth posted in the three months to June was largely due to a slowdown of semi-detached house prices.
“This was mainly attributed to the cooling down of semi-detached house prices, which had been witnessing annual growth rates of over 20 per cent earlier in the year down now to less than 10 per cent,” Hass Consult said in its recent survey.