Is Nairobi’s high end real estate market facing a bubble?

The high end real estate market in Nairobi is facing a possible bubble, with realtors being advised to invest in the grey low end market
According to property consultancy Knight Frank, the Nairobi market is experiencing a high supply low demand with developers’ returns on investment shrinking.
Knight Frank report shows that Prices of prime residential spaces dropped in Nairobi by 0.4 per cent by September and a further 2.3 per cent in quarter three (Q3).
Knight Frank Managing Director Ben Woodhams said that both the transactions and price of prime residential spaces dropped in what is a clear indicator of a struggling economy.
“Transactions happened in low volumes as buyers looked at longer term capital gains,” said Woodhams.
Rentals went down by 9.2 per cent in the year to June as the market grappled with an oversupply of spaces.
There was a slight decline in Q2 with the rentals dropping by 1.5 per cent.
Woodhams attributes the low consumption in the high end market to global economic constrains including unpredictable elections in US and a dip in global oil sector.
”The scale down consumption was due to the exit of multinational expatriates, especially in the oil sector following a slump in the global oil prices,” explained Woodhams.
The report has further warned of slow activities in the country’s real estate sector ahead of the forthcoming general elections, stating that investors are more conscious especially after the violence that hit the country after 2007 general elections.
Even so, the report has dismissed reports about the crumble of the country’s real estate sector, saying that it will be even more stable  regain after elections
Woodhams said that they expect more than three million square feet of office spaces to come online in the coming year.
He added that the current slowness in the market is as a result of just a slight imbalance between demand and supply.
He concluded that Investors are likely to rip more profits if they turn their energies in the neglected low end market.

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