Residential rental market sector remained lower in the first six months of 2021 in wake of coronavirus shocks and pressure on corporate budgets, says Knight Frank.

Prices of prime residential prices improved marginally by 0.1 per cent in Nairobi over the last 12 months to June this year, lower than 5.1 per cent decline in a similar period last year.

Knight Frank recent report  attributed the weakening on the new ‘normal’ by developers and sellers who are becoming more flexible with negotiations and willing to accept lower prices as well as buyers resuming their investment plans which were halted last year due to the pandemic.

“The decline albeit at a decelerated rate was mainly attributed to the reopening of the economy, roll out of vaccinations and landlords adjusting rental terms to accept lower rental prices,” notes the report.

Oversupply continues

It states that the continued oversupply of residential developments in areas such as Karen with the current economic state still makes this niche sector a buyers’ and tenants’ market.

In their estimations, analysts at Knight Frank expect prime residential sale prices and rental rates to gradually improve in the second half of 2021 due to the increasing flexibility from landlords and sellers, projected positive economic growth and containment of the virus.

Central Bank of Kenya (CBK) data shows that the number of mortgage loans in the market decreased by 4 per cent to 26,971 in 2020 from 27,993 a year earlier.

This was mainly attributed to hesitation from financial institutions to issue mortgage loans due to the pandemic uncertainty – with defaults on non-performing mortgages also loosening by 10 percent from Sh31 billion in 2019 to Sh 27.8 billion in 2020 due to higher repayments.