Returns on investment for residential property is projected to slow down 3.2 percentage points this year on reduced demand following uncertainty around the August 8 polls. Total returns are projected to average 9.4 per cent compared to 12.6 per cent in 2016, a report by Cytonn Real Estate said, attributed to lower price appreciation.
The Nairobi Metropolitan Residential Report 2017 said the rise in property prices has nearly halved this year to 3.8 per cent from 7.4 per cent last year. “This can be attributed to investors shying away from long-term investments as they awaited the outcome of the 2017 elections,” said the report. The Supreme Court, the country’s highest court, last Friday annulled President Uhuru Kenyatta’s victory and ordered the Independent Electoral and Boundaries Commission (IEBC) to conduct a fresh exercise in 60 days as per the constitution.
Rental yields are, however, expected to rise marginally to 5.6 per cent on average from about 5.2 per cent in 2016 on “sustained demand for rental units compared to units for sale. We expect the market to stabilise through 2018 after the elections period. However, there will be price stagnation in selected markets with surplus supply,” the report adds.
“Investors, therefore, need to invest in proper market research and trend analysis to identify specific market niches.”
Investors in detached units in the mid-end markets are seen reaping the highest returns of 11.1 per cent on average, followed by apartments in upper mid-end (10.5 per cent), detached units in lower mid-end segment (9.5 per cent), lower mid-end units in suburbs (9.2 per cent), while returns for detached units in high-end markets are estimated at 7.5 per cent.
The report singles out Ridgeways and Kilimani as offering the best opportunity for developers of residential apartments based on uptake, infrastructure and returns.
Relatively higher uptake and returns, on the other hand, make Juja and Runda Mumwe the best for investors wishing to develop detached units.
Source: Daily Nation