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Due to the decline in demand for luxury residences, the average rent in Nairobi, the capital of Kenya, and its surrounding towns fell by the largest margin in five years.
The average rent for residential space decreased by 1.2% in the year to March, according to data from the real estate firm HassConsult, compared to a gain of 2.4% in the same time the previous year. The decline is the sharpest since 2018 when rentals fell by 2.5% during an election year as investors worried about the results.
According to HassConsult, rental revenue from executive-favored luxury residences like semi-detached and detached homes fell. Workers renting houses chose less expensive flats in Nairobi’s outer suburbs including Rongai, Syokimau, and Ruaka as the demand for expensive residences in satellite towns also decreased and lowered rents.
In the year to March, detached homes saw the largest price decline, dropping 2.5%, followed by semi-detached homes with a 3.2% decline. Due to a rise in demand for more compact housing on the city’s outskirts, apartments in satellite towns defied the trend and had a 3.2 percent growth in the time under review.
“Rental market experienced a decline but demand for affordable apartments particularly in satellite towns impacted returns,” said HassConsult in the review of real estate trends for the period to March.
Due to this, the real estate industry saw a change in investments, with investors shifting their focus to apartment buildings.
According to HassConsult, the percentage of flats in the larger Nairobi real estate market has climbed to 64%, while the percentage of detached homes has decreased, going from more than 50% in the early 2000s and 28% in 2016 to 7.5% in March. The market is made up of 28.1% semi-detached homes.
“Nearly all towns posted growth on apartment rental pricing, highlighting the increasing occupancy rate of apartments targeting renters with a monthly budget between Ksh25,500 ($187.09) and Ksh50,000 ($366.84),” added the real estate firm.
Satellite towns maintained their positive returns on land prices throughout the time, which increased by 8.0 percent in the year to March. This was the greatest return during the relevant period since 2017. The communities’ increased attractiveness and more affordable housing stock have been blamed for the price increases.
At the conclusion of the 12-month period, Ngong and Syokimau had the fastest increases of 18.6% and 18.2%, respectively, while Ruaka maintained its average acre price of Ksh98.3 million ($721,203).
Land prices in Nairobi increased somewhat over that time by 1.4%, with Spring Valley seeing the most increases at 18.84%.
