2024, may just be “the year of the Lord” for developers and property professionals. For buyers, however, it is a mad rush to beat property prices before they are priced out of their dream locations. 2023, was no doubt a slow year for the property market. With inflation hitting unprecedented numbers, there was barely enough disposable income for buyers to spend on property. The credit market was also tight, making it difficult for developers to move units. In 2024, the real estate market trends in Kenya present some optimism.
Changing Real Estate Market Trends
The market recovered in 2024 and that means higher property prices and other interesting shifts. According to Kenya Bankers Association Housing Price Index released in August, 2024 property prices increased by 1.93% in the first quarter of 2024. The report also notes that this is the first price jump, in the last two years.
Additional data from the Kenyan National Bureau of Statistics shows that the Real Estate industry expanded by 6.8% within the same period.
This increase in property prices could be attributed to rising demand from buyers. Inflation numbers are down to 5.77% (as of August, 2024) – according to the Central Bank of Kenya, signifying a recovering economy.
41.79%
Affordable housing units accounted for 41.79% of real estate transactions in quarter 1, 2024. This a significant drop from 62.26% in the last quarter of 2023.
KBA Housing Price Index, 2024
With inflation down to normal numbers, it means the Kenyan shilling is doing much better and buyer purchasing power is also improving. In simple terms, more people are able to buy real estate and that automatically increases the demand, thus pushing prices up.
Declining Demand for Affordable Units
Another interesting real estate market trend, as captured by the KBA report is changing buyer preference.. Previously, properties within the affordable market were in very high demand. As of the last quarter of 2023, affordable units dominated transactions in the property market, accounting for 62.26% of the market share. In the first quarter of 2024, these numbers dropped drastically to 41.79%.
The middle income market has a slight improvement of 6.86% in transaction activity, while the luxury market had the most dramatic and unexpected increase. In the last quarter of 2023. Only 17% of transaction activities in the property market involved high end properties.
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In quarter one 2024, however, the transaction volume for luxury properties in Kenya jumped to 30.6%. This shift, from low-income properties to the high end market could be attributed to the cost of credit.
Interest rates on home loans and other types of credit rose to unprecedented rates in 2024, making in difficult for low income borrowers to secure funding from banks. Subsequently, developers might be focusing on high income earners who are not so pressed financially. Wealthy buyers have a higher chance of securing mortgage and other home loans compared to the riskier low income earners.
Appetite for Standalone Units
The preference for unit types is also changing. For a while, buyers have gravitated toward investing in apartments, while bungalows, maisonettes and townhouses took a back seat. This, however, is also changing. Though apartments are still in high demand at 37.31% (down from 40.19%), the demand for maisonettes and townhouses increased slightly in the first quarter of 2024.
Additional real estate market trends show that apartments may be oversupplied in the Kenyan market. As a result, the demand is much lower than the supply while standalone units may be undersupplied.
Dramatic Land Prices
Beyond IKBA’s report, land prices increased at a breakneck speed in 2024. Popular suburbs witnessed unbelievable price jumps all through the year. Lack of affordable options for parcels of land drove buyers to locations which had stagnated. In return, this propelled the demand for land within developed suburbs such as Juja, Kikuyu, Katani, Athi River and the likes.
In addition, government budget cuts across different ministries, and especially the transport docket have affected the real estate market. Traditionally, infrastructure development opens up new affordable markets. With budget cuts, infrastructure development has stalled, thus closing up the market, forcing buyers to turn back to the older, existing – yet relatively affordable locations. This increase in demand for these locations is undoubtedly driving prices up.
Property prices are expected to keep soaring as long as the economy improves and demand for real estate stays up. For more real estate market trends in Kenya, explore the blog for more articles.
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