House prices in prime residential areas of Nairobi fell by 2.3 per cent in the third quarter of the year on the back of low demand that depressed traded volume, a report by property management firm Knight Frank shows.
Ben Woodhams, managing director at Knight Frank Kenya, said the fall in transactions was due to buyers looking for good long-term capital gains — by targeting only properties that result in good returns when put back into the market.
Knight Frank says prime properties is seen as safe and resilient investment option by the wealthy compared to alternatives such as the stock market.
A report by the firm in September showed the value of luxury homes in Nairobi had shot up by 40 per cent over the past five years as more wealthy individuals opt to invest in the segment.
Knight Frank defines prime homes as the most desirable and expensive property in a location or the top-five percentile of each market by value.
In Nairobi, luxury home prices start from Sh80 million while the rent starts from Sh250,000 for apartments and Sh300,000 for townhouses and standalone units.
Rents for prime residential areas also fell by 9.2 per cent in the in the year to June following an oversupply in the market. The firm predicts the rents will stagnate until after the general election set for next year when they project demand to rise.
“The prime property segment is undergoing a normal property cycle.
“The pressure on rents is largely due to the current oversupply in the market,” he said.
The supply of office space has also exceeded the demand with three million square feet projected to have come into the market in 2016 alone.
The firm anticipates the small-scale oil production set to start next year will result in improved uptake of office spaces in Nairobi. Knight Frank, however, maintains that demand will not outgrow supply.
“We have a slight oversupply of office space but demand is still there.
“We expect half of the office space made available in 2016 to be in Upper Hill with Westlands taking up about 500,000 square feet and the rest of the space spread across the city,” he said.
Cement production and consumption is also expected to rise as developers embark on high-value projects after the elections.
Kenya National Bureau of Statistics latest data indicates that in the first eight months of the year, building plans valued at Sh212 billion were approved.