by Bedah Mengo NAIROBI
(Xinhua) -- The four-storey flat in
Kitengela, a suburb south of Nairobi, Kenya, stands imposingly,
dwarfing all the other houses in its vicinity.
flat and on the sides are huge signboards announcing that the two
and three-bedroom houses are up for rent, each going from 147 U.S.
About three months ago, the boards carried a different message
for about a year.
They announced that the houses were up for sale, with the two
bedroom units going for 47,058 dollars while the three-bedroom ones
Having found it hard to sell the houses, the property developer,
who has other units in Nairobi, decided to rent them out.
It is a path many house developers, especially those who have
built apartments, in the East African nation’s capital are taking as
the sector seemingly reaches a saturation point, with rents falling
and houses constructed for sale failing to get buyers.
A faster rise in property prices, pushing them beyond the reach
of most buyers, is now making many developers rent their houses,
which they had initially planned to sell, as they seek to recoup
return on their investment.
But even as they seek to rent out the houses, falling rent is
adding insult to injury to the developers.
According to latest report from real estate firm HassConsult,
annual house prices in 2015 rose by 12 percent with rents too
surging in some Nairobi suburbs by an average of 9 percent.
A three-bedroom apartment in the capital is going for between
53,921 dollars and over 110,000 depending on the suburb. Prices are
lowest in satellite suburbs.
Prices of bungalows and maisonettes have equally gone up over the
years, averaging between 63,725 dollars and over 130,000. Many
potential buyers are finding these prices steeper, with some
developers particularly in satellite towns cutting them.
However, this has done little to lure buyers, pushing the
developers to rent them out.
Of all the kind of houses, apartments are the worst affected.
"I must admit things are not really looking good in the property
"The bubble people have been talking about seems to have burst
because both selling prices and rent for apartments are falling,"
said Antony Kuyo, a real estate consultant with Avent Properties in
Kuyo acknowledged that many property developers in Nairobi, who
had initially planned to sell houses they were constructing, are now
renting them out.
"Currently we are managing a block of flat in Kitengela, which
was initially meant for sale.
"Since we announced in November we are renting, we have leased
out seven out of the 16 houses," said Kuyo, noting the houses had
stayed for over a year without people buying.
Analysts blame the developments in the sector to oversupply of
houses, especially apartments, and high mortgage rates that ward off
Commercial banks are offering mortgages at between 15 and 21
"Rents for all properties fell by 0.1 percent in the final
quarter of 2015, with apartments recording the highest fall of 2.3
The sluggish upward rent movement in Nairobi’s suburbs over the
year was attributed to an apartment oversupply leading to a rent
price correction in the segment," said Sakina Hassanali, the Head of
Research and Marketing at HassConsult.
She noted the drop in rent prices for apartments in particular
has also led to the decline in rental yields to 6.29 percent as at
December 2015, compared to rental yields of 7.14 percent recorded in
the same period in 2014.
There are almost five times more apartments in the market than
town houses and maisonettes combined, with the units taking up to 60
percent of houses in the sector.