Land and house prices to rise despite the lure of high yielding Treasury bills
Hass Consult research and marketing manager Sakina Hassanali. PHOTO | FILE
What you need to know:
Hass Consult said that land prices in Nairobi’s 18 suburbs had increased by 10.5 per cent between September 2014 and last month.
House prices, however, posted lower returns of 8.3 per cent over the same period.
The returns on land and houses in Nairobi and its satellite towns are lower than the latest Treasury Bill which had a 20 per cent coupon rate.
Land and house prices will continue rising despite surging interest rates luring investors to Treasury bills, bonds and fixed income deposits, property consultancy Hass Consult has said.
The firm said that on average land prices in Nairobi’s 18 suburbs had increased by 10.5 per cent between September 2014 and last month.
House prices, however, posted lower returns of 8.3 per cent over the same period. It made the revelations when it released its third quarter property index.
On average, the report shows that land prices in satellite towns increased by eight per cent while house prices in the 14 towns rose by 9.8 per cent over the same period.
The returns on land and houses in Nairobi and its satellite towns are lower than the latest Treasury Bill which had a 20 per cent coupon rate.
Hass Consult head of research and marketing Sakina Hassanali said they expect that investors will still put their money in land and property which have over the last seven years shown consistent growth noting that land returns are not cyclical like the stock and bonds markets.
“What we are seeing in the current economic environment is that investors are looking for safe asset vehicles and guaranteed returns. Land over the past seven years has consistently outperformed all other asset classes providing consistent yields to investors,” said Ms Hassanali.
The high interest rates on Treasury Bills which have affected the stock market are also affecting loan pricing.
Hass Consult said rising bank rates will not impact buying of land, town houses and apartments much though since Kenya is a cash buyers’ market.
“Only one per cent of houses are bought through mortgages,” said Ms Hassanali at the briefing.
High interest rates are however expected to affect developers.
The latest report adds that rents have begun to stabilise based on data from the third quarter of the year which showed that prices, for both Nairobi suburbs and satellite towns, marginally rose by 1.6 per cent across all house types.
The report adds that rents for apartments dropped by 0.5 per cent over the same period, attributed to tenants finding it harder to pay more. The annual rent increase between September 2014 and last month stood at 9.8 per cent.
Other property consultants including Knight Frank and Villa Care also said rents have been stagnating especially in prime areas due to some multinational firms reducing their budgets and cutting back on their workforce.
“This cutback has greatly affected the residential occupancy levels. When multinationals come into the country, most of the employees are expatriates and foreigners who rent out units from a minimum of six months stay. Properties in secure and high- end areas are usually the best option for these individuals,” Villa Care chief exective Daniel Ojijo had told the Business Daily.
Data from Knight Frank’s latest report shows that rents for prime residential properties in Nairobi suburbs increased by only 1.4 per cent in the year to June 2015.
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