Satellite towns record high rental yields

The residential and commercial sectors enjoyed improved performances in the first quarter of this year — both on average return to investors and prices.

In most of the categories for both detached units and apartments, average rental yields increased compared to the first quarter of 2021, the Cytonn Q1 2022 Markets Review shows.

The average year-on-year total return to investors stood at 5.7 per cent, a 0.6 per cent increase from 5.1 per cent recorded in the first quarter of 2021.

“However, on a quarter over quarter basis this was a 0.4 per cent points decline from the 6.1 per cent average total return in 2021. Prices in all segments saw an uptick with an overall average price appreciation of 0.9 per cent in the residential market,” noted the report.

“The average rental yield recorded a 0.2 per cent points year over year increase to 4.8 per cent from 4.6 per cent recorded in the first quarter of 2021, attributed to improvement in rental rates amid an improved economy.”

Detached units also recorded an improved performance in the quarter of this year compared to a similar period in 2021, with average returns to investors coming in at 5.4 per cent, a 0.6 per cent increase from 4.8 per cent.  

“This was attributed to investor confidence in the market, that saw transactional volumes pick amid recovery in the real estate market,” the report indicated.

“Satellite towns were the best performing segment with an average year over year total return of 5.8 per cent, with Syokimau and Ngong offering the highest average year over year total returns at 6.7 per cent. The best performing node was Redhill, which recorded the highest average year over year total returns at 7.2 per cent, followed by Syokimau and Ngong, and finally Athi River whose average year over year was 6.6 per cent. Rongai and Langata recorded the lowest returns at 4.2 per cent.”

Apartments also registered improvement in the quarter, with average total returns recording a 0.7 per cent points  increase to 6.0 per cent in the first quarter of 2022 from 5.3 per cent in the first quarter of 2021.

Satellite towns, the report noted, continued to be the best performing segment with average year over year total returns coming in at 6.3 per cent.

This was attributed to the relatively high rental yield averaging at 5.4 per cent and an average year over year price appreciation of 0.9 per cent. The best performing nodes in terms of returns were Waiyaki Way, Westlands, Imara Daima and Ruaka which recorded average returns of 8.4 per cent, 8.1 per cent,7.6 per cent, and 7.5 per cent, respectively attributed to high rental yields coupled with resilience of house prices.

Donholm and Kikuyu were the worst performing nodes which recorded average year over year total returns of 4.2 per cent each. The commercial office sector also retained its average rental yields and asking rents at 7.3 per cent and Sh94 per square feet, respectively, in the first quarter of 2022.

“The overall occupancy rates increased by 0.3 per cent points to 77.9 per cent in the period of focus due to an increased demand for office spaces, as various firms resumed full operations at the beginning of the year,” noted Cytonn.

Ms Faith Mutio, the assistant head of sales at Superior Homes, says that buyers were ready to pay higher prices for property so they could right size, and notes that Superior Homes had more sales in 2020 at the height of the pandemic than even in 2019.

She says that over 60 per cent of the people who buy prime property at Superior Homes use mortgage financing.