Kenya’s prime residential prices in Nairobi slid by 6.5 percent in the 12 months to March 2019, according to the latest PGCI for the first quarter released on Tuesday, 4 June 2019.
This is the most significant reduction in values in a 12-month period that Nairobi has ever recorded since the index commenced recording data.
The trend has been occasioned by continued oversupply, with large numbers of new properties coming into the market, and relatively few transactions in the high-end residential market.
In the three months to March, luxury home prices softened by half a percentage point, continuing a trend that has seen prices drop or remain unchanged in the city for the eighth consecutive quarter since the second quarter of 2017.
The price decline saw Nairobi drop in ranking to 42, out of the 45 locations tracked by the global index.
Cape Town, the only other African city in the Knight Frank Prime Global Cities Index (PGCI), is ranked nineteenth with a 2.1 percent increase in the 12-month period and a marginal 0.1 percent price decline in the quarter.
Prime residential values in Nairobi peaked in the first three months of 2016 and have since fallen by a cumulative 9.2 percent over the last three years.
However, luxury home values are still about 38 percent higher than in 2010, representing decent capital gains in the high-end market segment, according to the real estate consultancy.
“Data tends to lag the market and we believe we will see further drops in the coming months as the market has continued to soften. Owing to the high values of the properties tracked and the current supply levels, plus the ongoing credit crunch, transactions will remain few and staggered unless vendors become realistic on pricing,” said Anthony Havelock, Head of Agency at Knight Frank Kenya.
The build-up in supply has also resulted in high vacancy levels in the rental segment, piling pressure on rents in the top end of the market with further reductions expected.
Generally, luxury home price growth has slowed worldwide in recent years with the PGCI now averaging 1.3 percent, the lowest annual rate since the final quarter of 2009 when the world was in the grip of the financial crisis, according to Knight Frank.
Knight Frank headquartered in London is the leading independent global property consultancy.