Oversupply of apartments and falling demands has led to a drop in rental rates in Nairobi in the final quarter of 2015, according to a report released by HassConsult on Monday.
According to the firm’s head of research and marketing Sakina Hassanali, the reduction in rental prices in the capital has led to decline in rental yields to 6.29% in the last quarter of the year compared to 7.14% in the same period in 2014.
Ms Hassanali noted that many developers, in a bid to make maximum use of the land, have resorted to constructing high density houses as opposed to detached ones. This she said was due to an upsurge in land prices in the city.
Due to this, Ms Hassanali, said the city has “ended up with so many apartments hence the drop in rental prices and yields.”
In contrast, Nairobi’s Upper Hill area, defied the trend with rental prices. The report indicated that the rental prices in the area have been tripling in the last 8 years due to increased demand.
The firm argued that land and property investors are still earning much from their investments as this is the best performing asset sector. Many people who wish to own homes, have had their dreams thwarted by the high lending rates on mortgages, leaving many to continue renting.
The report said: “The average value for a one to three-bedroom property is currently Sh13.4 million in Nairobi while the mortgage rates still remain in the upwards of 17% despite efforts to tame interest rates in Kenya.”
It is not just apartments in the city that have been affected by the changes, the rates within Nairobi environs have also been growing at snail-pace due to an oversupply of apartments, Hassanali added.
However, rental rates in Nairobi’s towns such as Kiserian, Kiambu, and Mlolongo have been on the rise since 2007.
The firm’s head of research and marketing said that investors are moving to satellite towns in order to get favorable returns in land.