Tenants to pay higher rents as property market falls

Tenants to pay higher rents as property market falls
  • Rental development in Nairobi experienced sluggish growth as a result of a new law which capped interest rate at 14.5%
  • Kenya currently faces a housing deficit of over 200,000 units per year yet only 50,000 units are being constructed annually
  • Both sale and rental prices in satellite towns in 2016 have witnessed the lowest annual increase since 2008 attributable to an economic downturn

 

Tenants in Nairobi County should expect a hike in rent prices in the near future following recent sluggish in growth in the property market.

According to the HassConsult property index for the fourth quarter of 2016, rental development in Nairobi experienced sluggish growth as a result of a new law which capped interest rate at 14.5%. This, in turn, caused lending institutions to lock out a majority of potential investors from accessing credit for the sake of real estate development.

The slow growth rate in rentals and property prices means there will be a shortage of rental houses while demand will grow, a move that would force landlords to increase the amount of rent.

According to Sakina Hassanali, HassConsult Head of Research & Marketing, both sale and rental prices in satellite towns in 2016 have witnessed the lowest annual increase since 2008 attributable to an economic downturn that saw a cooling down of transaction numbers in these areas,

“In the last quarter, the market was optimistic that the interest rate cap law would result in advancing more affordable credit which was expected to increase loan uptake and spur the property market. Unfortunately, this has not been witnessed as commercial banks are more cautious in lending and this continues to hamper the potential growth in Nairobi’s property market,” said Ms.  Hassanali.

Analysts at real estate development firm, Cytonn Investments say the upcoming general elections have also contributed to the declining rate of real estate developments as investors have withheld their projects, waiting for election fever to calm down.

Fresh data from the Housing Ministry reveals that Kenya currently faces a housing deficit of over 200,000 units per year yet only 50,000 units are being constructed annually.

According to Land Cabinet Secretary, Jacob Kaimenyi, the increasing house deficit is due to the fact that there are more people are travelling to urban areas than those travelling to rural areas.

 

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