Nairobi’s high-end property market is showing signs of cooling after prices marginally increased in 2013.
Prices of prime properties rose marginally by 4.9 per cent in 2013 compared to the double-digit growth recorded in previous years, the Wealth Report 2014 by property management firm Knight Frank and Citi Private Bank shows.
The report ranks Nairobi at position 31 out of 85 cities that have the most lucrative property markers.
This is the second consecutive year Nairobi has lost ground in the Knight Frank Property Index after being ranked number 10 in 2012 when prices rose 10 per cent. In 2011, Nairobi was ranked top with prime property prices growing at 25 per cent, the fastest of 75 cities surveyed.
Cape Town, at position 51, is the other African city in the list after its prime property prices increased by 0.2 per cent in 2013.
Knight Frank analysts say Nairobi ’s strategic position will continue attracting multinational companies, the main drivers of demand for top-end properties.
“Key among the continent’s emerging hubs is the Kenyan capital, Nairobi. This is the most important African business centre between the Mediterranean and Johannesburg,’’ said Anthony Havelock, Knight Frank’s head of agency.
The report said that transnational corporations recognise that Africa is too diverse to be run entirely from South Africa. “Google, JPMorgan Chase, Colgate-Palmolive are all here (Nairobi),” says the report.
Jakarta had the highest returns in 2013 at 37.7 per cent while Milan had the lowest at negative 10 per cent.
The 2012 report said that Nairobi’s prime property prices had increased by 25 per cent, the highest return out of 75 cities covered that year. The Coastal region was ranked second with returns of 20 per cent.
Knight Frank said that uncertainty over elections and high interest rates after the Central Bank of Kenya tripled the base rate to 18 per cent from six per cent in late 2011 contributed to the city dropping in rank 2012.
However, Hass Consult’s 2013 annual report, shows marginal decreases in house prices located in the same regions. The report shows that the average house in Muthaiga cost Sh62.5 million in the third quarter of 2013, a four per cent drop from Sh65 million in 2012.
A similar house in Lavington that was going for Sh26.7 million in 2013 was Sh27.5 million a year earlier, a three per cent decrease.
For land prices, results from real estate companies show mixed results in property gains in prime areas for 2013. Data from Mentor Management shows that an acre in Muthaiga goes for Sh150 million compared to Sh125 million a year ago.
In Lavington, an acre of land goes for Sh200 million compared to Sh150 million a year ago, a 33 per cent increase.
Mentor Management CEO James Hoddell had earlier said that the changing of zoning laws that allowed for construction of flats and commercial offices in neighbourhoods such as Upper Hill, Kileleshwa and Lavington was one catalyst for land price appreciation.