The average rent for an apartment in Nairobi fell slightly in the last quarter of 2015 for the first time since the Hass Property Index was introduced in 2000, the latest real-estate survey shows.
The Hass Property Index for the fourth quarter says the asking rents for apartments fell by 2.3 per cent.
Hass Consult head of research and marketing Sakina Hassanali said the rise in land prices, especially in Nairobi County, has increasingly resulted in developers putting up many apartments where standalone houses stood in order to make efficient use of land.
The result has been a surge in the number apartments which now account for 60 per cent of the rental property market.
“Developers are under pressure from the increased scarcity and surge in land prices to maximise land usage hence a majority prefer to construct high density apartments.
“This has led to an increased supply of apartments over the last five years,” said Ms Hassanali.
The index tracks advertised rents and land prices in 18 major suburbs in Nairobi and 14 satellite towns. Average rent for one to three-bedroom apartments that are tracked by the index is Sh71,748.
The fall in asking rents for apartments in the fourth quarter of 2015 resulted in a drop in rental yields or returns which stood at 6.29 per cent as at the end of last year against 7.14 per cent in 2014.
Other property players agree rents are not increasing in most suburbs due to overconcentration by developers in these areas.
“There is a general freeze on rent prices, and we have noticed this, ” Villa Care chief executive Daniel Ojijo told the Business Daily.
“Also, there is a huge influx of apartments in areas where the middle class want to live such as Kileleshwa, Lavington, Dagoretti, Ruaka, Ngong Road, Kilimani and such localities. The supply is not relative to demand so the apartments stay for long periods without being taken up, thus the rents stay the same or have to be reduced.”
Mr Ojijo said high interest rates have seen apartments’ owners try to pass the high costs to tenants in vain.
The Hass report revealed land prices continue to rise but only marginally. Prices in Nairobi increased by 1.3 per cent in the last quarter while in satellite towns the increase was by two per cent.
The average price for an acre in Nairobi is Sh173.6 million while a similar parcel in a satellite town went for Sh15.6 million.
The Upper Hill node of Nairobi County has the most expensive land with an acre going for Sh509.5 million while in satellite towns Ruaka tops the list with an acre going for Sh86.6 million.
Hass Consult expects prices in satellite towns will continue to grow as infrastructure is rolled out.
“On average, land prices in the satellite towns have risen by more than six-fold and will continue to increase as infrastructure developments like Standard gauge railway near completion,” said Ms Hassanali.
Property prices in satellite towns have increased by 6.4 times since 2007 while in Nairobi the increase has been by 5.74 times.