House Prices Fall in Nine Suburbs Across Nairobi

Asking prices for houses fell for the first time in ninelocations across Nairobi, signalling a slowdown in thereal estate market, the Hass Property Index for 2013 shows.

Some of the estates have somewhat matured and are thus experiencing a price correction after puffed up growth over the past decade, while some became unattractive for a commuting working class.

The discovery now reveals that speculators have burnt their fingers, falling short of their targets in real terms. The annual survey tracks 43 residential locations.

Muthaiga, an affluent neighbourhood and a darling for expatriates, was the biggest casualty of the price correction wave that hit Nairobi and its environs last year, with home sellers slashing asking prices by four per cent.

The estate has the priciest houses in Nairobi, with average askingprices at Sh65 million in 2012, but which fell to Sh62.1 million in 2013.

Other locations that saw asking prices fall in the year were Lavington, easing off by three per cent, while Brookside and State House were three per cent down. Mountain View, Lang’ata, Valley Arcade, Fedha Estate and Madaraka eased by a percentage point each.

“For a bubble to burst it has to form first, and we haven’t experienced one yet. What we have seen is slower growth in house prices year-on-year. That’s the slowdown; a natural reaction to certain factors in the market such as mortgage financing, change of government and a market maturity in some location,” said Nathan Luesby, JengaWeb’s managing director and a consultant for the Hass Property Index.

The slowdown in buyer demand resulted in a nearly directly proportional increase in rental prices in the year, as the locations with higher buyer demand also had higher tenant demand. The trend also coincided with locations where commercial properties were in high demand such as Mombasa Road and Upper Hill.

“There was a surge in mid-market pricing for both rents and sales in areas wherecommercial building has been most active,” said Sakina Hassanali, head of research and marketing at HassConsult.

“Certain pockets of the market were getting overheated; not the entire property market,” she said.

South C topped the list of suburbs that recorded an increase in average askingprices with 15 per cent, with sellers quoting Sh12.6 million for the same houses that they asked for Sh11 million in 2012. Nyali was second with 14 per cent.

The two suburbs tied in rental price change in the year, at 20 per cent, the second highest increase after Upper Hill’s 23 per cent.

Average rents in South C moved up from Sh36,500 in 2012 to Sh43,800 as Nyali’s moved up from Sh61,400 to Sh73,800. South B was third in rent increases with 19 per cent, from Sh29,500 to Sh35,200.

“The opening of many new headquarters and offices along Mombasa Road, and the heavy traffic that acts as a barrier to commuters working in them, fuelled a surge in both rents and house sale prices in the immediately adjacent suburbs of South C and South B,” Sakina said.

Riverside, a second tier residential location as per HassConsult’s rankings, was the only estate where rents did not move at all. Average rents remained flat at Sh115,000 in the estate.