Kenyans Walk Away From Purchasing Houses Over Weak Shilling


The depreciation of the Kenyan Shilling has continued to have adverse effects on the real estate industry with many players complaining of slow business including stalled deals.

A report published by real estate company, Knight Frank covering the period between July and December 2023 observes that many Kenyans were backing out of deals to purchase houses at the very last minute.

Knight Frank’s report points out that many Kenyans with an interest in purchasing houses believe that most properties currently listed in the market are overpriced since most of them are valued in Shillings.

The depreciation of the Kenyan Shilling is impacting property valuations, with buyers feeling that quoted prices are beyond market value. This has led to further delays in finalising sales,” the report reads in part.

Former CBK Governor Patrick Njoroge holding bank notes.

Photo

CBK

As a result, some landlords have been opting to price the houses in foreign currencies including the Dollar to ensure they seal the deals and also make profits in the long run.

“To mitigate against the declining Kenyan Shilling, sellers are increasingly listing their properties in major global currencies, mainly USD, Euro, or the British Sterling Pound.

“Moreover, sellers accepting payments in major world currencies have been able to secure buyer-friendly deals, as sellers prefer such currencies to offset potential losses caused by the Kenyan Shilling’s diminishing purchasing power against these currencies,” read the report in part.

Notably, in the second half of 2023, the Kenyan Shilling exchanged at an average of Ksh148.5 against the Dollar while in the first quarter, it traded at an average of Ksh132.

This means that within the two quarters, the Dollar gained against the Shilling hitting Ksh165 at one point in February.

Currently, the Dollar is trading at an average of Ksh160.

Meanwhile, owing to the depreciating Shilling, landlords renting houses and office units, have also opted to list their property in Dollars as they seek to attract foreign clients and recoup their investment.

Hotels and short-stay accommodation owners are also opting to receive payments in Dollars.

Knight Frank projects that the demand for Dollar rents will continue to be a common trend throughout the year. 

“Due to the persistent loss of purchasing power of the Kenyan Shilling against the USD, landlords face losses when collecting rent in Ksh while servicing dollar-denominated loans,” added the report.

A photo of affordable houses in Embu County undertaken under the government’s housing programme in March 2022.

PCS





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