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Demand for rental property rose further during the second quarter of the year, as high interest rates increased house prices, making them unaffordable to many, the latest Hass Property Index shows.
The index shows rents for apartments, stand-alone houses, bungalows, cottages, townhouses, maisonettes and villas accelerated by 2.4 per cent between April and June.
Rents for semi-detached houses rose more sharply, by 7.8 per cent, while apartments and detached houses recorded a 1.1 and 1.2 per cent increase in rent, respectively.
“Interest costs were prohibitive for the lower-cost housing buyers and this in turn saw a rise in demand for rental property and a subsequent increase in rental prices,” said the head of research and marketing at Hass Consult, Sakina Hassanali.
The recent decision by the Central Bank’s Monetary Policy Committee to raise the Central Bank Rate to 11.5 per cent from 10 per cent, she said, will lead to further increase in rental prices. CBR is the rate CBK lends to commercial banks on and it dictates the cost of loans.
MPC said the move aims to stabilise the weakening shilling against the US dollar and halt the resultant increase in the prices of goods and services.
“The decision to increase the CBR to 11.5 per cent is the first one seen in nearly four years. Historically, lower-cost housing development has either stagnated or declined when lending rates have risen as the cost of lending is too high both for developers and for buyers,” she said.
The index shows the average rent for villas in Nairobi has increased from Sh38,516 in December 2000 to Sh137,311 in June 2015.
It indicates the average rent for a one-to-three-bedroom property is Sh75,531 while a four to six-bedroom property is at Sh222,685.
“Landlords are currently earning over 23 per cent returns annually on let apartments, which is highest since August 2009. Likewise semi-detached and detached houses have recorded returns of 19.7 and 10.8 per cent, respectively, which are the highest returns since 2011,” she said.
According to the index, apartments have overtaken the market for semi-detached and detached houses over the last 15 years.
The apartments market has grown from 45.3 per cent in 2001 to 60.2 per cent.
Over that period, the market for semi-detached and detached houses has shrunk from 20.5 and 34.1 per cent respectively, to 12.1 and 27.7 per cent.
The Hass Property Index is based on 6,500 house price records per quarter and has surveyed more than 110,000 pricing records from across the country over the last five years.
– See more at: The Star
