16 Apr 2013
Properties in Nairobi Kenya saw the largest increase in prime rents, rising 17.9 percent in 2012 while prime rents in key cities globally rose by 5.1 percent in 2012, up from 3.5 percent a year earlier.
This is according to the Knight Frank Prime Global Rental Index which reveals an increase of 1.6 percent in Q4 2012 with emerging markets reportedly seeing the strongest rental growth in 2012.
Writing in the report, Kate Everett-Allen, international residential researcher at Knight Frank, explains that a tight mortgage market coupled with limited supply (in the established markets) and rising property prices (in the emerging markets) pushed many would-be home buyers into rental accommodation.
Cape Town in South Africa came in at number 15 with an increase of 1.1 percent in rentals while London was ranked number 16 with a decline of -3.2 percent as a result of the ongoing Eurozone financial crisis and the uncertainty in the financial sector.
The index currently stands 20 percent above its financial crisis low in spring 2009.
Everett-Allen explains that since this time prime rents in Hong Kong have recorded the strongest growth (up 42.2 percent) while Moscow has seen the smallest rise (up 3.3 percent).
The report notes that the challenging business environment is affecting housing allowances for expatriates around the world, not just in Europe and North America.
Corporate tenants are opting for smaller units given budget constraints.
In Shanghai for example, homes available at less than RMB 20 000 a month are currently enjoying strong demand, she points out.
“Although the emerging markets of Nairobi, Dubai and Beijing topped the rental rankings in 2012, we expect prime rents in the more established markets of London, New York and Zurich will see renewed growth in 2013 as supply constraints and the tight mortgage market prop up tenant demand.”
According to the Broll Annual Property Report 2013, in Kenya, demand for homes is mostly seen in lock-up-and-go apartments in secure estates with easy access to commercial hubs and notably, diplomatic nodes.
Broll notes that demand for furnished, quality accommodation is particularly high in areas such as Gigiri and Westlands.
According to the report, rentals range from about $3 250 (R27 500) a month for apartments to an average of $4 000 (R33 900) a month for townhouses.
Demand in new developments such as Tatu City, Migaa and Thika Green is driven by the improved multi-lane Nairobi-Thika highway.
Meanwhile the Knight Frank Africa Report 2013 reveals that residential rentals average US$4 400 per month with 6 percent prime yields.
Rental values have continued to increase partly as a result of a shift away from the mortgage market, resulting in improving yields across the sector.
According to Knight Frank, a rapid increase in interest rates from 16 to 25 percent in Q4 2011 led to a slowdown in residential development, which was in danger of overheating at the time.
Since then, property sales volumes especially in the mid-market have dropped although house sales at the very top end of the market have been largely unaffected.
With interest rates slowly falling and a relatively stable economy, a post-election recovery is expected in this sector in the Q2 2013. – Denise Mhlanga
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