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Property Investors to Shy Away as Demand for Houses Set to Drop Further

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2nd April 2019
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Specialists in the real estate sector have raised concerns over the diminishing demand for houses in the country saying the real estate investors will need to start resorting to other measures in a bid to stir property uptake.

In the current reports, it emerges that it is likely of supply outweighing demand soon and hence the need for the real estate investors to think outside the box.

Recently, a listed mortgage firm, HF Group, has been running a campaign offering 100 per cent financing and reduced prices by up to 30 per cent. This came after the group posted its first ever full-year loss of Sh598 million in 2018 down from a net profit of Sh126 million in 2017.

“This campaign is anticipated to accelerate property sales and improve our liquidity position, HF Group Chief executive, Robert Kibaara, said.

On the other hand, Standard Chartered Bank Kenya announced a new mortgage offer that guarantees customers 2.5 per cent fixed margin rate throughout its life circle.

Investors willing to have the mortgage will enjoy an 11.5 per cent rate with no legal or value fee attached.

Dan Waweru who owns a two-bedroom house on a half-empty four storey apartment said that the building which is located near Quickmatt Supermarket in Lavington’s Valley Arcade, managed to attract only one new customer last year, despite the 20 per cent discount offered.

“I was among the first occupants of this building, having paid Sh10 million. The price was slashed last year to Sh8 million, but only one person bought a unit. I bought too early, prices likely to drop further,’’ Waweru said.

According to the Q4 Hass Property Index, there was a 3.2 per cent year on year drop and later grew by 2.7 per cent since the year 2007.

Property prices also dropped in Kileleswa, Parklands, Westlands, Langata and Kilimani on low demand.

“On the supply side, the market appears to be tilting towards few additional units coming into the market due to constrained access to credit by developers. Limited credit is a binding constraint on the demand side,’’ Kenya Bankers Association House Price Index (KBA-HPI) reported.

Several malls are yet to have tenants, a clear indication that the demand has drastically gone down.

Juja City Mall along Thika Superhighway built at 1.7 billion is however to be occupied fully, the same case applies to Kenyatta University’s Unicity Mall and Ananas Mall in Thika town.

According to CBK governor, the fact that the occupancy level has gone down has seen many investors turn out to being loan defaulters.

According to CBK, the sector contributed Sh6 billion to Sh18 billion increase in nonperforming loans in February, 12.8 per cent year on year gross bad debt compared to 12 per cent in December 2018.

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