The Kenyan real estate industry recorded a bounce back after two years of a sharp drop during the COVID-19 pandemic, a report by Architectural Association of Kenya has shown.
During this period, said the report which covered the year 2022, most people reserved their savings to support their livelihoods rather than investing in sectors such as real estate.
The loss and reduction of income streams and reduced lending by banks and other financial institutions due to the economic uncertainty also translated to decreased investments in land and property.
The pandemic was also an eye-opener, making people appreciate the need for spacious rooms, clean air, and sufficient parking, leading to improved quality of spaces in property
development. According to the Land and House Price Report by Hass Consult, land and property prices registered an overall increase during the first quarter of 2022.
Specifically, land prices in Nairobi increased by 0.11%, while those in satellite towns posted a 2.17% increase. Similarly, there was an annual 6.8% rise in property sales from March 2022. The findings resonated with those of the Kenya National Bureau of Statistics (KNBS) which recorded a 6.4% growth in the construction industry in the same period.
During the second quarter of 2022, property prices continued to increase, recording a 3.3% increase, and posting strong market growth. This was attributed to the rising cost of building materials, and developers factoring in the inflation rate and losses from the weakening Kenyan shilling.
In the period, the total property returns were up to 16.26% per annum, placing property at the peak of investment returns. Land prices for all satellite towns in Nairobi posted an all-time high asking price. The highest recorded was Tigoni which recorded a 6.5% increase, where the average price was KES 27,700,000 per acre.
In the third quarter of 2022, property prices recorded a 0.8% price growth, which was a relatively slow growth rate attributed to the stagnated apartment sales market. The growth was mostly driven by the detached housing segment which recorded a 1.5% increase, where detached units in Juja and Loresho increased by 5.1% and 3.6% respectively.
The tough economic environment was also reflected in rents which slightly dropped by 0.2%, where the highest rent increases were in Ruiru at 6.4%. In terms of land, prices in Nairobi’s 18 suburbs remained stable with a 0.8% drop during the third quarter. Syokimau was the best performing, recording a 6.89% increase while Juja recorded an all-new
high of KES 18.8 million an acre.
Similarly, KNBS records that the construction sector was relatively slower in the third quarter, recording a 4.3% growth compared to a 6.7% growth in Q3 of 2021. This could be attributed to the Elections.
Comparatively, the HassConsult Land and House Price Report highlighted that the last quarter of 2022 recorded a 2.2% drop in property sales, leading to an average annual price growth of just 4.8%.
This was mostly attributed to the rise in the cost of living in the year 2022 and global inflation. Land in most of Nairobi suburbs remains static recording a 0.19% increase during the quarter. The slow growth was majorly a spillover of the low activity recorded in Q3.
In general, the economy’s recovery has significantly contributed to the rise in the price of land and houses while also reviving the rental market. Additionally, infrastructural developments across various parts of the country have also been a significant factor in property prices.
Looking forward, the Landlord and Tenant Bill will also significantly influence the direction of rent once it is passed into law.
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