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Prices for houses improves but mortgage market remained sluggish

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By Ben Kinyanjui

 

Prices and rents for houses in Nairobi recorded a hike in the first quarter of this year but mortgages market remained subdued.Ms Sakina Hassanali, head of marketing for Hass Consult says prices have improved .Ms Sakina Hassanali, head of marketing for Hass Consult says prices have improved .

According to Hass consult property sales volumes also picked up from January and February but remained strongest in March.

However, the most intense activity was at the top of the market, with the cheapest properties still taking the longest to sell.

“The market continues to be handicapped by the lack of access to mortgages for mid-level and lower level buyers,” said Ms Sakina Hassanali, head of marketing for Hass Consult.

“Nationwide, the demand for housing is strongest at the lowest end of the market, but the financing options are almost non-existent, rendering the private sector property market a high-end affair for so long as property remains a cash purchase only,” she said.

The bottleneck in housing finance also continued to push rents up, as professional Kenyans stayed in rented accommodation, with the rental of choice being semi-detached town houses.

Highlights

  • House sale prices bounced back in Q1 after the dip of the second half of 2013
  • Asking prices for detached and semi detached houses rose 1.8 per cent compared with the previous quarter
  • The price bounce was most pronounced for apartments, up 2.3 per cent on Q4 2013
  • Rent rises also accelerated marginally in the first quarter
  • Rents for detached houses rose more sharply, up 2.3 per cent, as did apartment rents, up 2.2 per cent
  • The strongest rent growth continued in semidetached houses, but at a slower rate of 2.7 per cent higher than the previous quarter, making rents for semi-detached houses 18.1 per cent higher than a year earlier
  • Sales volumes rose, but most markedly for cash-financed high-end properties

Asking rents for semi-detached houses rose a further 2.3 per cent in the first quarter of 2014 compared with prices from October to December last year, and were 18.1 per cent higher on a year earlier.

The rent rises for detached houses were much more subdued, at 8.7 per cent on a year earlier, while apartment rents rose by 4.4 per cent across the year.

“With the finance blockage also impacting landlords in acquiring new properties, and the rental yields on properties still at less than mortgage interest rates, the race is now on to get rents up to a level where landlords can cover finance costs and not end up making losses,” said Ms Hassanali.

Until then, and with cash buyers continuing to drive the market, some further asking price rises are likely in 2014, based on the reduced flow of new building - caused by the high levels of finance costs for developers.

However, many developers have now found alternative means of financing, either by raising money outside Kenya, or through taking equity stakes in projects.

“The outlook is for some marginal improvement in the rate of new building from this year, but a market that will continue to be substantially oriented to cash buyers, meaning substantially the very wealthy: until housing finance becomes a policy priority,” said Ms Hassanali.

 

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