Nairobi Metropolitan Area Residential Report 2017/2018

The Nairobi Metropolitan Area Residential Report 2017/2018 is produced by Cytonn Research, and tracks the performance of the formal residential market in the greater Nairobi metropolitan area, covering over 35 submarkets. The 2017/2018 report outlines the performance of the markets, highlighting some of the key factors affecting demand and supply of residential markets, and the overall performance of the sector.

The reports shows that Kenya’s real estate sector remained an attractive asset class in 2018 due to relatively high returns, stable and continued growth in the sector, and demand for residential developments. Although the sector was hampered by limited access to credit, demand in the sector was positive, bolstered by increasing household incomes and a stable and growing population and relatively high population growth rates. Supply side indicators affecting the residential sector include positive developments such as ongoing government initiatives and policy, and infrastructural development. The sector is however negatively affected by limited availability and cost of developable land; lack of proper funding, and a land regime comprised of multiple land tenure systems, which affect development processes.

Overall, for the 2017/2018 period, the residential sector recorded total returns of 8.2%. This was a 1.2%-point decline from returns recorded in 2017. The average price appreciation was 2.8%, with an average rental yield of 5.4%. Declined performance was attributable to a decline in price appreciation, a sluggish growth in some markets. High average annual returns were also observed in apartment units, with average returns of 8.7% compared to 7.6% in detached dwellings. This was attributed to increased demand for apartments due to a rapidly increasing population and also the relative affordability of these units.

Looking forward, the residential sector in the Nairobi metropolitan area is expected to develop positively, bolstered by a continued demand for residential developments, a stable macroeconomic environment, and continued infrastructural improvements. Key challenges that could hamper the sector’s development include high land costs, high construction and infrastructural costs, and access to financing.

Click here to access the earlier Cytonn’s Nairobi Metropolitan Residential Report 2017, published September 2017.

Download the 2017/2018 report (published July 2018) on the link below.