|Oversupply hurts high class housing market|
|Written by Written By Morris Aaron for the Standard January 20 2010|
Nairobi’s high-end property bubble burst at the end of 2008 after a take-off in mid 2006, according to a composite property index released by Hass Consult — a property firm.
The Hass Composite Index, which relies on actual sales data over the last five years, also shows that high-end residential houses prices were hit by flat or falling demand for the better part of last year and into this year.
Combined with last year’s fourth quarter report, the second edition of the first property index, Hass Property Index indicate that the high-end property market is undergoing a market correction after the bubble burst.
"Both indices show that with a dip up here and a dip down there, house prices, both the asking and selling price, were almost flat last year," said Fatima Melodina sales and letting manager.
The Index showed that in general, sale of houses in Nairobi rose marginally during the second and third quarters before a sharp downward correction of 3.2 per cent in the fourth quarter.
Prices doubled between 2005 and 2008 in the high-end market, but have since remained flat or fallen due to oversupply compared to the slight up and down swings. However, in a surprise indication of changing consumer behaviour after coming out last year with a property index that hinted that house prices were falling, the number of concluded sale transactions at Hass Consult has gone up by 0.4 per cent in the fourth quarter compared to the third quarter.
This is attributed to what the company termed an "increase in sales closures after depressed levels of activity in the previous quarters."
According to the index, the average price of houses has also increased to just over Sh20 million from Sh19 million in the third quarter, resulting in the change. "Hass Consult saw the upper end of real estate impacted by some softening in sale of apartments last year, but is still achieving an average price higher than the sector’s wide average," said Ms Moledina.
The two reports are the latest admission of things not going so well in the high-end residential housing market areas of Nairobi, that have been the subject of debate for the last two years, coming when a section of real estate players have refused to come in the open with their transaction data.
The Hass Property Index, whose first issue was released towards the end of last year, showed that residential house prices in Nairobi’s posh areas fell by 1.4 per cent and 2.2 per cent in the second and third quarters.
This trend is in deep contrast with 2007 and 2008 when house prices appreciated by about four per cent every quarter, translating to a 30 per cent appreciation per year.
Hass Consult is now calling on property companies to join in an effort that will show the true picture of real estate pricing trends.