Rental prices fall as tenants move to apartments and Rongai

Rental prices in Nairobi have fallen 1.2 percent over the last one year according to realtor Hass Consult, as residents leave the city for satellite towns that are gaining from the influx of customer mostly headed to Rongai.

Over the last one year, rental prices have collapsed in Parklands dipping 11.3 percent on the city estate adjacent to the capital’s CBD.

Further, Donholm got one for the chin, losing 6.2 percent in rent returns over the first quarter this year.

Rongai on the other hand has become the centre of attraction and rent return has gained 5.9 percent in the last quarter and 22.8 percent over the last year as Kenyans look for units retailing between Kes25,000 and Kes50,000 per month.

“The rental market experienced a decline of 0.5 percent in average over the last quarter, and decrease of 1.2 percent over the past year,” said Ms Sakina Hassanali, Head of Development Consulting and Research at HassConsult.

“However, rental price trends in the satellite towns, are bucking the trend. Nearly all towns posted positive growth on apartment rental pricing highlighting the increasing occupancy rate of apartments targeted at renters with a monthly budget between Kes25,500 and Kes50,000,” she said.

Job losses, higher expenses due to surging inflation is forcing Nairobi city residents to relocate from the capital in search of cheaper alternatives in satellite towns.

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Nairobi is the world’s 160th most expensive city this year, according to a Mercer Cost of Living report with the very expensive cost of land and real estate passed on to consumers through very expensive rent.

The cost of renting in Nairobi has actually altered the City’s landscape over the last twenty years as demand for housing shifted from detached houses to apartments that have mushroomed all over the city causing friction with owners of the detached units.

Recently Citizen TV aired a documentary Nairobi High-rise slums inKilimani, Kileleshwa and Lavington areas where residents complained the new units were putting a strain on the available amenities and utilities, leading to burst sewers pipes, perennial water shortages and traffic gridlocks.

Nairobi Governor Johnson Sakaja even said  that his government is in court battling close to 800 developers who moved onto construction sites without approval, developed beyond the approved structures or simply ignored county disapprovals to continue constructing apartments.

The reality however noted by HassConsult detached houses in the property market has steadily decreased over the last twenty years, accounting for only 7.5 percent of all properties currently, compared to over 50 percent in the early 2000s.

“It is worth noting that detached homes now account for only 7.5 per cent of the market, down from 28 per cent in 2016 and over 50 percent in the early 2000s, while apartments’ market share grew to 64.4 per cent and semidetached homes increased to 28.1 per cent during the same period,” said Ms. Sakina Hassanali.

This has meant that Nairobi residents have mostly shifted to apartments and satellite town leading to a dip in demand for old estates dominated by detached houses such as Parklands and Donholm.

For investors, the demand for affordable rental properties, particularly apartments in satellite towns, has impacted the overall returns, as indicated by rental yields and capital gains.

Apartments located in satellite towns recorded average rental returns of 3.4 percent over the quarter and 9.0 percent annually, respectively.

“This trend is being further boosted by the underperformance of other asset classes such as bonds, equities, and fixed deposits, making these apartments an attractive investment option,” added Ms. Hassanali.

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