The average rent in Kenya's capital Nairobi and satellite towns dipped by the biggest margin in five years in the wake of reduced demand for luxury homes.
Data from real estate firm HassConsult show the average rent for residential space shrank by 1.2 percent in the year to March compared to a growth of 2.4 percent in a similar period last year.
The fall is the steepest since 2018 when rents dropped 2.5 percent in an electioneering period, with investors fretting over the outcome of the polls.
HassConsult reckons that rental income from luxury homes like semi-detached houses and detached homes targeted by executives dropped.
Demand for costly homes in satellite towns also dropped and pulled down rents, but workers leasing homes opted for cheaper apartments in the suburbs surrounding Nairobi such as Rongai, Syokimau and Ruaka.
Semi-detached houses reported the biggest shrinkage in prices, dipping 3.2 percent followed by detached homes that fell 2.5 percent in the year to March.
Apartments in the satellite towns bucked the trend to record a 3.2 percent increase in the period under review on the back of increased demand for smaller units in the outskirts of the city.
“Rental market experienced a decline but demand for affordable apartments particularly in satellite towns impacted returns,” said HassConsult in the review of real estate trends for the period to March.
This triggered a shift in investments in the real estate market, with property investors putting their money in apartments.
HassConsult says the share of apartments in the wider Nairobi property market has increased to 64 percent while that of detached houses has plunged from over 50 percent in the early 2000s and 28 percent in 2016 to 7.5 percent in March.
Semi-detached houses account for 28.1 percent of the market.
“Nearly all towns posted growth on apartment rental pricing, highlighting the increasing occupancy rate of apartments targeting renters with a monthly budget between Ksh25,500 ($187.09) and Ksh50,000 ($366.84),” added the real estate firm.
Over the period satellite towns continued with their bullish returns on land prices rising by 8.0 percent in the one year to March being the highest return over the referenced period since 2017.
The rising prices have been attributed to the towns’ affordability and improved infrastructure which have made them more attractive.
Ngong and Syokimau recorded the fastest jump at 18.6 percent and 18.2 percent at the end of the 12-month period while Ruaka remained with an acre averaging Ksh98.3 million ($721,203).
Over the period land in Nairobi rose marginally by 1.4 percent, with Spring Valley rising the fastest at 18.84 percent.