Oversupply of houses, insecurity and the reintroduction of Capital Gains Tax (CGT) has driven luxury house prices in Nairobi down by 1 per cent in the first three months of 2015.According to the Knight Frank Prime Global Cities Index, developers built more houses in response to increased foreign investors interest in the city, causing excess supply than the available demand.
Knight Frank Agency head Anthony Havelock on Wednesday said rapid growth in construction of houses in the city was also spurred by an expanding pool of local wealthy individuals seeking to buy trophy homes.
“Our data going back five years shows Nairobi has been a star performer globally, with values growing by 20-25 per cent per year. What we’ve seen over the last year is price stabilization. If you drive around the city, there has been a huge amount of construction and buyers for the first time have got choice,” Mr. Havelock said.
The quarterly report, ranking prime residential markets in 35 cities worldwide, said Nairobi has witnessed a moderate growth in supply that widened the spectrum of options in niche property market thereby creating room for price negotiation between buyers and developers.“Unlike before, homeowners and developers servicing loans were willing to settle for flat price growths in some neighborhoods,” notes the report.
Knight Frank Kenya Managing Director Ben Woodhams said the country’s security situation slowed down transaction volumes during the quarter.
The high-end market, whose mainstay is the expatriate community, was hardest hit.“The spate of insecurity witnessed last year affected the entire real estate sector leading to a depressed market, and some investors opted for alternative forms of investments such as government securities. The expatriates are now changing the way they live and properties they occupy due to security concerns,” Mr. Woodhams said.
The market also remained reserved following the reintroduction of Capital Gains Tax from January 1, 2015. Prices stabilized as the market awaited clarity from the Kenya Revenue Authority on the enactment of the new law according to Knight Frank Index.
Market vibrancy is expected to pick up in due course, fueled by inbound investments as multinationals eye pockets of opportunity in the extractive industry and the growing aspirational consumer market.
Buyers eyeing the entry high-end residential market are encouraged to take the opportunity before momentum picks up as the weaker shilling is expected to boost foreign investment.
Source :Daily Nation