The Kenyan real estate sector was poised for growth since COVID-19 was declared a public health emergency back in 2020. Mansiondeal a Kenyan online real estate marketplace) reports a negative price growth in the last 12 months as the sector was hit hard by the COVID-19 pandemic.
One of the biggest effects of COVID-19 pandemic was job loss. Data from the Kenyan National Bureau of Statistics (KNBS) shows the number of employed people fell by 1.72 million in a period of three months between April and June. The most affected group was below the age of 35 years working for big and small corporations. Without jobs, the unemployed have no financial ability to pay rent or mortgage for that matter.
Real estate demand increases with a rise in the number of local jobs. Therefore, reduction in local employment means reduced rents and prices paid by tenants and buyers for real estate. Unemployment has a negative effect on all types of real estate. As people lose their jobs, the need for office space, residential space, commercial space and industrial space is reduced by a greater amount. Leases, reduced rents, reduced home prices and increased vacancies across all segments of Kenyan real estate economy are direct results of job loss.
Another reason for reduced house prices is the oversupply of residential and commercial properties. Real estate being a tangible asset is affected by the law of supply and demand. This law is simply a basic economic principle that explains the relationship between supply and demand for either goods or services and how that interaction affects their prices.
When there is high demand for real estate, the prices rise. If there is a large supply of real estate and not enough demand, then the price falls. The precise values attributed to the supply and demand in a market is a bit difficult to measure in the real estate market because it takes a long time to construct new homes or renovate old homes to put back into the market.
The most affected places are those with high-end properties like Loresho and Kileleshwa where prices have dropped by more than 10%. Mansiondeal CEO Peter Munge believes that the market will bounce back now that things are going back to normal and developers should focus on affordable housing because of the growth of the middle class population in Kenya.
The effects of the COVID-19 pandemic on the real estate sector will be determined by how long it will last. “The market is expected to experience a slow recovery post-COVID-19 as uptake will be subdued due to depressed income levels and changed priorities by prospective investors. The government is expected to continue putting in place sound fiscal policies to cushion businesses and people’s disposable incomes.”