Kenyan landlords, especially those stationed in Nairobi, made high returns through property sales or through charging rent despite a weakening Shilling, a new report by Hass Consult has revealed.
The report covering the fourth quarter of 2023 released on Monday showed that all 18 suburbs within the city attracted higher returns for all house purchases.
According to the report, inflation averaged 7.7 per cent in 2023 which forced consumers to reduce their spending due to the high cost of living.
Furthermore, the weakened Shilling, currently trading at Ksh160 against the dollar, raised input costs for developers, which in high-demand suburbs had inflationary effects on property prices.
An aerial view of Nairobi City’s skyline in 2023.
Even with the increased input prices, the property market offered a total return of 8.3 per cent in the fourth quarter of the year, illustrating renewed resilience in the face of the challenging conditions that also included high-interest rates.
According to Sakina Hassanali, Head of Development, Consulting and Research at Hass Consult, the weaker currency made the property market attractive to foreign investment.
“Although the weaker currency raises input costs for developers on ongoing and future projects, it makes the Kenyan property market attractive to foreign investment, buoying asking prices due to augmented demand from these investors,” she stated.
Several estates had better returns on an annual basis with Ongata Rongai leading at 15.4 percent followed by Athi River (15 percent) Kitengela (11.6 percent), Loresho (11.5 percent).
“These returns competed favourably with those of Treasury bills and bonds whose net returns ranged from 9.5 percent to 17 percent in 2023. Concerns about the safety of bonds due to the government’s high debt exposure however saw some investors seek alternative investments, which included property,” added the report.
“The property returns from the best-performing satellite towns and suburbs also outperformed the NSE 20 Share Index, which had a return of -9.4 percent in 2023, and bank savings that averaged 3.8 percent in interest through the first 10 months of the year.”
This comes as more landlords continue to make a shift by charging rent in dollars in the high-end neighbourhoods such as Karen, Runda and Lavington among others.
Shunguli Duncan of Rock Field Properties told Kenyans.co.ke last week that the number of landlords demanding that rent be paid in Dollars had increased exponentially in recent times.
“Some of the owners are not local, they are expatriates. They prefer dollars because of the instability of the Kenyan Shilling,” he explained.
Nairobi Securities Exchange, Nairobi Kenya.