Oversupply of vacant houses forces rent downwards in city

As the financial crunch bites and the economy continues to slowdown, landlords have been left with no other option, but to lower house rent to attract new tenants as well as retain old ones. Several corporates in Kenya have retrenched staff, rendering thousands of workers jobless. These include banks where more than 5,500 have been sent packing, manufacturers, security companies, small businesses, agricultural firms and media houses. Landlords of prime residential suburbs of Nairobi are the worst hit, mainly due to an increase in the supply of houses against low demand. As a result, developers have had to reduce selling prices in order to attract clientele, while landlords are reducing rents. In areas such as Lavington, Loresho, Kilimani, Naivasha Road and Ruai, among others, tenants are already enjoying lower rents. One such tenant is Mercy Mueni who rents a one-bedroom house in Ruai. When she moved in early this year, rent was Sh8,500 per month, but in August this year, when almost everybody vacated the four-storey building, the landlord reduced rent to Sh6,500. “This was a relief to many of us and since reduction, the house has been fully occupied. Other houses around this place have followed suit and they are now recording high occupancy, unlike before,” says Mueni. According to Knight Frank’s Kenya Market Update First Half 2019 report, prime residential prices fell by 1.8 per cent, leading to an annual decline of 6.7 per cent in the year to June. This was a sharp contrast to the 0.4 per cent decline recorded in the first half of 2018. Slow economy “Oversupply of prime residential properties in Nairobi is applying pressure, forcing buying prices and rents downwards,” reads the report. In Lavington, a one-bedroomed house is now going for Sh55,000 per month, down from Sh75,000, while rent for a two-bedroomed unit has now reduced from Sh120,000 to Sh105,000 per month. In the same area, a three-bedroom unit now costs Sh125,000, down from Sh140,000. Loresho hasn’t been left behind, with some landlords reducing rental prices by as much as Sh20,000 as well. Kiserian recorded the highest drop over the quarter, with rents in the area reducing by 4.6 per cent while Athi River recorded the lowest annual growth rate for houses at 4.1 per cent, according to HassConsult’s Quarter Three report on rentals. The report said the tough economic conditions continue to weigh the overall rental and property sales markets with rental prices for all properties falling by 0.9 per cent in the quarter. On Naivasha Road in Dagoretti North, a tenant of Muhu Building woke up to a surprising message last month that she would be paying Sh8,000 per month instead of Sh10,000. This message was a surprise to tenants, but Paul Newton, the property’s agent, ascertained the authenticity of the letter. Supporting tenants The letter addressed to Nancy Muriithi from Sian Realtors Ltd said: “We thank you for being our valued customers over the period. We have noted a serious business fall in recent months. Amara Ridge, developed by Cytonn Real Estate in Karen, Nairobi. PD/TIMOTHY NJENGA We, therefore, extend our support to your business by reducing your rent. Your new rent from November 1, 2019 is Sh8,000, down from Sh10,000. We advise you to continue paying your rent on time.” Newtown said they had arrived at the decision after keenly scrutinising how tenants were settling their rent arrears in the last few months. “We noticed they were struggling to raise the money, and, therefore, we had to reduce the monthly charges. However, when the economy improves, we might revise the rent upwards,” Newton told our sister station, K24 Tv. According to a Cytonn outlook for the residential sector, the market remains neutral and the current financial environment will continue to exert pressure on residential prices. Samuel Ndoro of Fandy Properties Agencies attest to this, saying landlords from Kasarani have reduced the rents by between Sh1,000 to Sh2,000 to ensure that they attract tenants. Despite all these efforts, more house now around Kasarani area are vacant, with people moving to rent smaller units. Ndoro has been advising the landlords to reduce rents rather than deal with vacant houses. For those who have heeded his call, their houses are fully occupied and whenever vacated, they are able to get new tenants easily. “This message has been resisted by some landlords, but those who have headed to my calls are not complaining. I see no essence in high rents and vacant homes. You better lower your rent to ensure that all the houses are occupied,” said Ndoro. Due to the economic slowdown, house prices in Nairobi’s high-end market fell by 5.4 per cent in the year to September, according to the Knight Frank Prime Global Cities Index (PGCI) for Q3 2019. Values of prime residential real estate continued to drop as the market softens, albeit at a slower pace compared to the 6.7 per cent in the year to June and 6.5 per cent in the year to March.

Oversupply of vacant houses forces rent downwards in city

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