EAST AFRICAN NEWS

Reports indicate that residential property prices are stagnant in most areas and sales prices sluggish even in traditional popular suburbs like Muthaiga, Langata or Brookside.

“Investment in property is beginning to lose its sparkle. This is a trend that could repel potential landlords, tighten demand for rental property further and usher in a general slowdown in the building, construction and housing market,” said Ms Sakina Hassanali, Hass Consult’s head of research and marketing.

She made the remarks yesterday during the launch of the Hass Index quarterly and annual report for the fourth quarter of 2013. Expected to be hard hit by the slowdown is almost anyone buying, selling or living in a property.

In the report, it was revealed that in the fourth quarter, interest rates barely moved. Two banks, CFC Stanbic and Barclays came to the end of their promotional offers on mortgages, ushering in rate increases. No mainstream bank actually cut its rate although some more expensive banks went into models offering better rates. The market leader with the most competitive mortgage rate was Standard Chartered at 13.9 per cent while Consolidated Bank brings in the rear with a rate of 19 per cent, against the Central Bank Rate of 8.5 per cent.

MIDDLE CLASS

“To observe such interest rate spreads is painful for those of us who have worked ceaselessly to develop this market,” said Caroline Kariuki, CEO of The Mortgage Company Ltd.

High mortgage rates make these financial instruments beyond the reach of many prospective homeowners, especially those in the middle class.
“With a mainstream mortgage market that seems relatively struck, except for outliers, time has come for a national debate on how to finance the mortgage market, including how to lend to those who are buying homes for a lifetime and generations ahead,” said Ms Kariuki.

The 2013 Annual Report by Hass Consult, on house price movements in Kenya, shows a surge in pricing for both rents and sales in the areas where commercial building has been most active.

For instance, opening of many new headquarters and offices along the Mombasa Road, and the heavy traffic that acts as a barrier to commuters working in them, fuelled a surge in both rents and house sale prices in the immediately adjacent suburbs of South C and South B.

Yet the nearby Embakasi, home to the lower middle class, saw no such growth, with rents and house prices rising very little, while Mlolongo, also along the Mombasa Road, stood out as a beacon of strategic disappointment.

The rush of apartment building in the area, on the premise of a new commuter belt stretching even to Athi River, saw property that offered too few perks in space, pricing and lifestyle versus the considerable extra commuting time.

“This survey brings home how vital it is to understand market positioning and demand trends in property choices and investment,” said Ms Hassanali.