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Is oversupply of apartments killing real estate in Nairobi?

By EDWIN OKOTH January 26th, 2016 2 min read

Rental prices in Nairobi recorded a drop in the final quarter of 2015 caused by an oversupply of apartments and falling demands.

A report released on Monday by HassConsult showed a 0.1 per cent drop in rents in the last quarter of the year as living in apartments cost 2.3 per cent less.

The firm’s head of research and marketing Sakina Hassanali said the fall in rental rates in the city ate into returns for investors with yields dropping to 6.29 per cent compared to the 7.14 per cent recorded in the same period in 2014.

“Most developers are resorting to construct high density houses since they want to maximise land usage and recover on the rising costs of land in the city.


We have, therefore, ended up with so many apartments hence the drop in rental prices and yields. Rental rates in the suburbs have also been rising sluggishly over the years due to an apartment oversupply leading to rent price correction in the segment,” Ms Hassanali said in Nairobi on Monday.

In December alone, apartments reportedly took up 59.6 per cent of the rental market causing a drop in returns from 23.99 per cent in August to 20.34 per cent as at end of December 2015.

The situation is compounded by the expected increase in completed buildings as developers rush to finish constructions this year before an election in 2017.

Upper Hill, which has the highest property price per acre in the city, defied the trend with apartments there fetching a 7.8 per cent rise in yields due to increased demand.

Rental price jumps have been on the rise yearly including a doubling of rates in Nairobi’s satellite towns such as Kiserian, Kiambu, and Mlolongo since 2007.


The news of drop in rental rates will be a short-lived music to the ears of Nairobi tenants whose wish for cheaper housing has remained elusive while home ownership has become a preserve of a few thanks to high mortgage rates.

“The average value for a one to three bedroom property is currently Sh13.4 million in Nairobi while the mortgage rates still remain in the upwards of 17 per cent despite efforts to tame interest rates in Kenya,” noted the property consultant.

Investors in the land and property sector still smile all the way to the bank with HassConsult saying it remains the best performing asset sector.

Results for the entire year, however, showed a 9 per cent rise in rental prices while purchase rates rose 11.9 per cent in 2015.

SOURCE: Daily Nation