Real Estate Developers Continue To Make Losses As Prime Residential Prices Fall

According to a new report by international realtor Knight Frank Prime Global Cities Index, House prices in Nairobi have been on a sharp decline in the last quarter of 2019. Housing prices slid by 5.4 pc in the year to September, the Decline has been associated with oversupply as more and more Kenyans opt to invest in the real estate sector.

Prime residential real estate values dropped 6.7 per cent in the year to June as buyers sought opportunities in a market segment still influenced by oversupply and distressed properties. The values have been declining at varied rates year-on-year successively since Q3 2016.

“Prevailing macro- and micro-economic conditions coupled with an oversupply in the segment have resulted in a sustained price correction, subsequently buyers have control of the market,” the report states.

The report has once again cast a dark shadow over the Kenyan real estate industry that was promising in previous years. In the first half of 2019 Kenya Insights had reported local developers were taking major hits as their earnings continued to dip.

The latest report places Nairobi at position 43 out 45 cities that were covered. All prime prices for the 45 cities dropped to an average of 1.1 pc during the year to the third quarter compared to 3.4 pc recorded in the same period last year. Knight Frank’s Kenya Market september 2019 report had shown that prime residential prices in the country fell by 1.8 pc which contributed to a 6.7 pc decline in the year to June. This was a sharp contrast to the 0.4 pc decline that had been recorded in the first half of the previous year.

Anthony Havelock, Agency Head at Knight Frank Kenya says Kenyans shouldn’t expect the prices to go up any time soon. “We haven’t reached the bottom of the cycle yet and we expect to see further reductions in the near-term until the macroeconomic and local situations improve. One of the major issues right now is illiquidity in the market,” he says.