Property rental prices may further be affected due to the falling number of expatriates in the country. According to expert analysts and property owners, the residential market already in the grip of oversupply will continue to remain subdued as expatriates exit the country due to the Covid-19 crisis. These are challenging times for property owners in high-end areas as the exit of expatriates is forcing them to reduce rent. The real estate industry has become the biggest victim of the current virus outbreak.
According to Knight Frank’s Africa Residential Dashboard for the first half of 2020, upmarket rental property has been losing tenants as expatriates leave the country pushing a decline in rents. Rents and sale prices in Nairobi maintained a downturn trend in the first half of 2020. This was due to the unfavourable economic climate, continued oversupply of residential developments and low liquidity. Rents on Kenyan high-end property has fallen by 6.55 per cent over the last six months. The prime residential houses in places such as Muthaiga, Karen, Lower Kabete and Runda declined by 2.9 per cent in contrast with a 1.8 per cent decline in the same period.
Covid-19 pandemic occurred in Kenya mid-March leading to the disruption of economic activities at a time residential prices were on a softening trend due to oversupply of housing units. The land registry was closed due to the pandemic, thus resulting in fewer transactions being finalised and potential buyers opting to postpone land purchases. Also, the real estate sector suffered from a host of tenants escaping to less expensive units.
The exit of expatriates who are the main target clients for the high-end real estate market, returning to their homes due to the Covid-19 pandemic, has left developers and landlords in distress. A report by Knight Frank shows that a quarter of high-end homes are vacant given the average occupancy of 73 per cent in the six months to June. The sale prices of prime residential houses have declined by 5.1 per cent while rent for the same houses is down by 7.62 per cent.
“Potential buyers and tenants were hesitant to view properties physically, and real estate firms like ourselves provided virtual tours to offer walkthroughs of properties they are interested in,” said Anthony Havelock, Knight Frank’s head of the agency. The firm’s website registered a 47 per cent increase in users over May and June this year. In the office market, prime rents in Nairobi remained unchanged in the first half of 2020 at $1.3 (Sh140) per square foot per month as many firms allowed staff to work from home. The stagnation was mainly attributed to the current economic slowdown.
The reports indicate that prime rental rates decreased from $4.6 (Sh495) per square per month to $4.2(Sh452). According to HassConsult, the tough economic times necessitated rent renegotiations with many tenants unable to continue paying the usual rates. Landlords over the review period provided incentives and concessions to attract and retain new occupiers. Prime residential prices are also expected to decline although at a slower rate. As the economy slowly reopens, land registries are expected to fully resume, thus allowing pending land transactions to be finalised. The hospitality sector is showing signs of improvement as footfall is expected to increase in the second half of 2020 due to the adjustment of curfews hours and easing of other government directives.