This archive report was first published on 4 October 2021.
Kenya's real estate sector has been experiencing a surge in activity, particularly in the third quarter of 2021. This uptick in market activity is largely attributed to the ongoing reopening of the economy, as reported by Cytonn in their latest report.
One of the key sectors that have seen improved performance is the residential sector, which recorded a 0.7 percent point increase in its performance. The commercial office sector, on the other hand, saw a decline in average rental yields, from 7.2 percent in Q3 2020 to 6.9 percent in Q3 2021.
The retail market also recorded average rental yields of 7.5 percent, similar to the previous year's figure. The land sector, however, saw a significant increase in average annualized capital appreciation, with land prices in satellite towns realizing a 4.5 percent capital appreciation.
According to Wawira Antony, a Research Analyst at Cytonn Investments, several factors contributed to the improvement in the real estate sector's performance. These include the government's efforts to support affordable housing projects and the availability of affordable mortgages through the Kenya Mortgage Refinance Company.
However, the sector still faces several challenges, including the continued oversupply of commercial office space in the Nairobi Metropolitan Area and the existing oversupply of retail space in the same area, which is largely attributed to the rise of e-commerce.
Despite these challenges, the residential sector saw apartments record an average total return of 6.1 percent year-on-year, while detached units recorded an average total return of 4.8 percent. Detached units in Ngong were the best performers, with an average total return of 7.1 percent.
