Residential and commercial property on the outskirts of Nairobi recorded the highest increase in prices in the last quarter of 2012, a survey by real estate firm Hass Consult shows.
Townhouses, apartments and stand-alone houses in counties such as Kajiado, Machakos and Kiambu had higher growth in capital and rental yields between October and December compared to similar houses within the city, whose rate of growth is on a plateau phase.
â€œThe steepest sales price increases came in outer zones such as Karen, Ongata Rongai and Komarock where prices rose by around 20 per cent,â€ said Hass Consult in its property index annual report for 2012.
Hass Consult head of research and marketing Sakina Hassanali said Wednesday the price increases were due to buyersâ€™ bet on both capital gains and high rental yields in the outer estates unlike Nairobi suburbs such as Westlands, Riverside, Kilimani and Langâ€™ata whose growth appears to have peaked.
The four suburbs saw asking prices increase by between one and two per cent in the last quarter of 2012.
The Hass Consult Composite Index looks at rental yields and asking prices of stand-alone houses, townhouses and apartments across 43 suburbs in Nairobi and neighbouring counties.
The city suburbs are classified into three zones, A,B and C, where A is high, B middle and C lower end.
The real estate consulting firm, however, noted that there are suburbs in the zones that go against the general trend due to the condition of roads and other factors.
â€œNot all outlying suburbs are outperforming. Buyers need to be mindful of the popularity, aesthetics and accessibility of an area, as well as general trends,â€ said Ms Hassanali.
For instance, the survey found that the average sale price for a house in Ngong, placed in Zone C, increased by eight per cent to Sh8.4 million from Sh7.8 million in fourth quarter of 2012 when compared with the fourth quarter of 2011.
A similar house in Lower Kabete, placed in Zone A, cost Sh47.3 million from Sh41 million over a similar period or a 15 per cent increase.
Jenga Web managing director Nathan Luesby said that the sluggish increase in prices in the Nairobi suburbs is the result of a glut.
The annual report also shows that the real estate sector breathed a sigh of relief in the last quarter of 2012 following the gradual lowering of interest rates.
Hass Consult said that the Central Bank of Kenya (CBK) cutting of the policy rate saw rent and sale prices increase since it encouraged developers to seek credit.
Hass Consult said that re-energised activity was catalysed by the CBK reducing the benchmark rate to 11 per cent from 13.5 per cent between the third and fourth quarters of 2012.
â€œThe interest rates rate cuts in the middle and later part of 2012 brought many buyers back into the market in the latter part of the year, and also saw project financing reopen and construction work that had stalled for many months commencing,â€ Ms Hassanali.
Mortgage Company managing director Caroline Kariuki said that bank rates are still high despite a series of successive cuts by the CBK.
â€œAs of today, none of the mainstream banks offering mortgages in Kenya has yet moved to cut interest rates following the 150 basis point cut by the CBK last week.
The banks Ms Kariuki said, swiftly increased their interest rates following the regulatorâ€™s move to raise the policy rate. However, have been slow to reduce the interest rates after CBK cut the benchmark rate.
Banks have, however, countered this argument by saying that they too have taken deposits at high rates.
â€œWe expect lending rates to decline end of quarter one as deposits mature and are re-priced,â€ said Housing Finance managing director Frank Ireri told theÂ Business Daily.
The report shows that rent increased marginally by 4.1 per cent in the last quarter of 2012 compared with a similar quarter in 2012.
Overall rent increased by 16 per cent last year.
The property index shows that asking sale prices rose marginally by 1.7 per cent in the last quarter of 2012 compared with a similar quarter in 2011.-Business Daily