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Housing prices in Kenya decline due to economic slowdown and high inflation
By Today Financial News Reporter
Housing prices in Kenya have gone down marginally due to slow economic growth and rising inflation that has triggered high cost of living.
According to Ms Farhana Hassanali, Property Development Manager, HassConsult Limited, a leading estate management in Kenya, prices had fallen by two per cent in the second quarter, down from 1.8 per cent growth in the first quarter.
“This is gently landing, and entirely consistent with the slower economic growth that has followed from soaring oil prices and the uptick in inflation and living costs,” she said.
“We saw relatively few issues of property sales actually delayed, and there continues to be a pipeline of buyers, but we are no longer seeing the kind of pent-up demand necessary to keep pushing prices significantly higher.”
She says sellers have also contributed the drop of prices by becoming more realistic in their pricing in the last quarters.
Hassanali said asking prices across all types of properties rose by just 1.9 per cent in the second quarter as compared to the first quarter where house sellers pushed the prices up by 4.4 per cent.
This move came as a result of the unwillingness of the buyers to pay higher prices as they searched for bargain buys and cheaper prices, a step that cooled down the house prices.
She said this was common with the current stand- alone houses asking prices which rose by just 1.5 per cent in the second quarter, while that of townhouses and apartments rising by 2.9 per cent and two per cent respectively.
She also noted that there is little evidence of buyers increasing their offer prices as they are afraid of losing their properties to the competing buyers in the market.
“The continuing rise in asking prices is being driven by ambitious buyers who are then closing sales at somewhat lower final prices,” she said.
Rental incomes were also static between April and June, up by an average of just 0.1 per cent as witnessed in the previous quarter, with flat rental prices brought about by the rising inflation.
Hassanali said that rents are now the only item in the household bill that is going up, a move that may reflect a long term adjustment in rental returns on rented properties.
Developers on the other hand are also being impacted by rising oil prices and in building materials and are therefore approaching the buyers with higher prices because their profits margins have declined.
Ms Hassanali expressed concerns that the on-going economic decline could lead to some slowdown in the construction activity.
“This situation is likely to get more strained in the coming months, with developers seeking to cover costs and buyers entering the market with tighter budgets which could see some patchiness in pricing and some delays in completions,” she said.