The prices of luxury houses in Nairobi have rebounded in the second quarter of 2015 after dipping by one per cent at the start of the year.
According to the Knight Frank Prime Global Cities Index, asking prices for luxury residential properties edged up by 0.9 per cent which saw Nairobi climb up six places to rank twentieth in the Prime Global Cities Index.
Knight Frank Kenya Managing Director Ben Woodhams said the decision to reverse the capital gains tax and weakening of the shilling has attracted investors who exited the market at the beginning of 2015.
The March to June period saw a number of prospective buyers return to the market, some of whom had previously put their plans on hold due to the uncertainty over the capital gains tax.
“It’s not a dramatic change, but it’s possible that some of the sales that could have happened in the first quarter were realised in the second quarter and could perhaps continue to flow into the current quarter,” Mr Woodhams said on Tuesday.
It is also anticipated that the significantly weaker shilling will draw more interest from international investors and Kenyans in the diaspora, as well as redirect some of the offshore Kenyan investments back into the country’s real estate business.
Kenyans have sizeable investments abroad and the development in the local currency markets would attract a lot of interest.
“The weaker shilling – mostly due to the strengthening of the dollar and the pound – is helping foreign investments in Kenya look more attractive. If I am earning dollars and I’m in New York or London, the change in the value of the shilling is a premium on its own and might just tempt me to buy an apartment say in Kilimani,” Mr Woodhams said.
He said the quality of housing has also improved as homebuilders compete for buyers in the high-end market, where supply is slightly outstripping demand.
The Kenyan housing market has seen increased activity in the high-end market.
According to the Kenya Bankers Association, House Price Index released in July, homes costing between Sh10 million and Sh25 million were attracting buyers in droves.
It said apartments are preferred more than bungalows and maisonettes.
Kenya’s annual growth increased to 2.1 per cent in the year to June.
The Prime Global Cities Index, which tracks luxury residential price movements across 35 cities worldwide, has been rising for 22 consecutive quarters, but the pace of growth has almost halved to 2.5 per cent in the period to June 2015.
Closer analysis shows that whilst more cities are recording positive annual price growth, the number of markets performing exceptionally strong has declined.