Property Market Slowdown Rattles Investors

Political uncertainty is taking its toll on the Kenyan property market and the slowdown is likely to continue through the rest of the year, according to a new study by equity firm Cytonn.

The residential property market, heavily impacted by dwindling demand, is projected to slow to 3.2 percentage points this year. Investors are holding back as they await the outcome of the fiercely contested presidential election, according to Cytonn Real Estate.

The company projects total returns to average 9.4 per cent compared to 12.6 percent last year, which can be attributed to slower price increases.

“This can be attributed to investors shying away from long-term investments as they awaited the outcome of the 2017 elections,” Cytonn said in a report, which noted that property prices rise has nearly halved this year to 3.8 per cent from 7.4 per cent last year.

Investors in rental houses are expected to see marginal income growth, with Cytonn projecting average rental yields of 5.6% compared to 5.2% last year. The firm attributes the growth to sustained demand for rental units compared to units for sale.

Although Cytonn expects the market to stabilize through 2018 after the elections, there will be “price stagnation in selected markets” due to excess supply.

Investors in detached units in the mid-end markets are expected to reap the highest returns of 11.1 per cent on average, followed by apartments in the upper mid-end at 10.5 per cent.

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Owners of detached units in the lower mid-end segment will reap 9.5 per cent, those of lower mid-end units in the outskirts at 9.2 per cent, while returns for detached units in high-end markets are estimated at 7.5 per cent.

Cytonn has identified Kilimani and Ridgeways as estates offering the best opportunity for developers of residential apartments, with Juja and Runda Mumwe as the best bets for developers wishing to put up detached units.

The General Election was held on August 8, but the Supreme Court on September 1 annulled the re-election of President Uhuru Kenyatta, saying the polls were not held per the law.

October 26 has been gazetted as the date for a repeat of the presidential poll, pitting Mr Kenyatta and Nasa leader Raila Odinga.

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