Rental prices in the Kenyan market are expected to rise further in coming months as demand shifts from home buying to renting amid high interest rates.
The Hass Property Index released by real estate firm HassConsult yesterday showed asking prices for rentals went up across all types of residentials in the first three months of 2012.
On average, rents for all rental property in Kenya increased by 4.4 per cent during the quarter, but have risen by 5.5 per cent in the last year. The firm said pent-up demand is now building pressure on available rental stock in the market as buyers wait in the hope of seeing house prices and interest rates fall ahead.
"We have seen sharp rises in asking prices for rentals in the first quarter, across all segments of the market," said Farhana Hassanali, HassConsult's property development manager.
Real pressure in rentals is being felt in the apartments segment which recorded a 5.6 per cent rise in prices in the last three months, signalling a sustained surge in apartment rents which has continued for several quarters now.
Cumulative rent inflation in this property segment is now running into double digit figures, with a 10.5 per cent change over the last one year to end of March 2012.
"We believe this push for higher rents for apartments is now set to be sustained for some time, as landlords seek to improve yields at a time when the supply of new apartments is now slowed, and buyers are holding off on home purchases and renting instead," said Hassanali.
First-time home buyers have been constrained by the currently high interest rates which have seen sellers stick to higher asking prices in the hope to re-coup their own higher costs in land, construction materials, and financing. "The combined pressure of these stalling buyers and the slower rate of new-build in apartments looks set to continue for at least some months ahead in pushing up rental prices," said Hassanali.
Rent values for stand-alone houses increased by five per cent in the quarter, but have risen 6.1 per cent in the last year. Rents for town houses on the other hand rose by 3.5 per cent in the period, but have fallen 1.2 per cent over the last year.
In home sales, there was a renewed push for higher asking prices from sellers in the first quarter, but buyers were unwilling to sustain higher prices, the Hass Sales Index showed.
"Our own closing price index, concentrated at the top and middle end of the formal housing market, delivered near static results in closing house prices ... with overall prices down by 0.7 per cent on the last quarter of 2011," said Hassanali.