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Adams Arcade, Ngong Road
P.O. Box 29310-00100, Nairobi

Tel: +254 729 933955, +254 737 933955
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Hass Index Report Quarter 2 2014 PDF Print option in slimbox / lytebox? (info) E-mail

Mid-market property surges on rising rent yields

• House price rises were more subdued in Q2 , held down by a dip in asking prices for top-of-the-market detached houses
• Detached house prices fell by 0.3 per cent on Q1, and 2.1 per cent on a year earlier, in a price correction following from
the more than 10 per cent post-election surge in detached house prices
• Strongest price growth continued to be for semi-detached houses, up 3.3 per cent in Q2, and 6.7 per cent on year earlier
• Apartments also consolidated price gains of 2014, with a further 1.3 per cent rise in asking prices in the second quarter
• However, rental prices continued to rise far more rapidly than sales prices, up an overall 2.7 per cent on Q1.
• Rents rose more strongly for semi-detached houses, up 3.2 per cent, and apartments, also up 3.2 per cent
Demand for both buying and renting was concentrated in the mid market, in semi-detached houses and apartments
• This reflected the stronger performance in rental yields in the mid market, with semi-detached houses historically, and
currently, recording the strongest rental yields, at 7.77 per cent in Q2

Index Highlights:

*The Hass Composite Sales Index is a measure of asking sales prices, based on Mix Adjusted Methodology

*The Hass Composite Lettings Index is a measure of asking sales prices, based on Mix Adjusted Methodology

Hass Consult today unveiled the Hass property price indices for the second quarter, revealing rising price strength in the

mid-market,driven by the recovery in rental yields as a result of the two year trend of rent rises ahead of sales price growth.
The rise in property sales prices slowed, overall, in the first quarter - depressed by a 0.3 per cent drop in asking prices for

detached houses - to rise by 0.6 per cent across the property market.This brought house asking prices to the same level

as a year earlier, but the plateau in overall pricing reflected a mixed underlying performance - with a 2.2 per cent fall in

detached house prices over the last 12 months offset by a 6.7 per cent rise in semi-detached house prices and a 1.5 per

cent increase in asking prices for apartments.The ongoing and accelerating strength in the market for semi-detached houses

comes at a time when interest rates are expected to fall following the placement of the government's EuroBond - and the

consequent easing of public demand for domestic debt. With domestic bond returns currently running at 9.18 per cent, and

bond returns predicted to fall, improved rental yields are now gaining their lustre as an investment, spurring forward the

buy-to-rent market.
Historically, semi-detached houses have recorded the best rental yields in the Kenyan property market, peaking at 9.69 per cent

in December 2007, before falling - on swift house price rises - to bottom at 5.95 per cent in August 2011.
However, the marked surge in rental prices in the last two years, up a further 2.7 per cent in the second quarter, has delivered

steady gains in rental yields.
Rents for semi-detached houses rose a further 3.2 per cent in the second quarter of 2014, taking rental yields to 7.77 per cent.
The 3.2 per cent rise in apartment rents in Q2 saw rental yields for apartments recover to 7.47 per cent.
For detached houses, which have traditionally enjoyed yields at least one percentile point lower than semi-detached houses,

rent rises in the second quarter of 2.4 per cent delivered a rental yield by the end of the quarter of 6.55 per cent.
"The correction in the relationship between rents and house prices was a necessary one, following the run-up in property

prices from 2008 to 2011," said Ms Sakina Hassanali, Head of Research and Marketing at Hass Consult. "With the interest rate

environment now expected to shift, the restoration of property rental yields back into the 7 per cent to 8 percent range is once

again attracting new investor interest as a long-term investment."

For more information, please contact:
Sakina Hassanali
Head of Marketing & Research
HassConsult Ltd
ABC Place, Westlands
Tel: +254 020 4446914

SNAP SHOTS:

• The Hass Composite sales Index is representative of
all property for sale in Kenya
• Property values have increased by 3.46 times since
2000.
• The index shows a property price rise of 0.6% in the
last quarter and a 0.05% rise in the last year.

 

 


SNAP SHOTS:

• price of all properties offered for sale in Kenya.
• The average value for a property has gone from 7.1 million in December 2000 to 24.8 million in June
2014.
• The average value for a 4-6 bedroom property is currently 34.9 million.
• The average value for a 1-3 bedroom property is currently 11.6 million.

 

 

SNAP SHOTS:

•The Mix by Year is a measure of the percentage that each type of property represents in the market.
• In 2001, apartments took up 23.5% of the market,semi-detached took up 24.5% of the market and detached houses took up 52% of the market.
• In June 2014 however, apartments took up
41.7% of the market, semi-detached houses took
up 24.0% of the market and detached houses took up 34.3% of the market.


Breakdown of 10 years data by Year

SNAP SHOTS:

• Detached houses include stand alone houses, bungalows, cottages and villas either on their own plot or in a gated community.
• Property values for Detached Houses have increased by 4.00 times since 2001, a 0.3% fall in the last quarter and a 2.1% fall in
the last year. The average price for a Detached House is currently 35.2 million up from 8.8 million in December 2000.



SNAP SHOTS:

• Semi-detached houses include townhouses and maisonettes that are semi-detached or terraced.
• Property values for Semi-detached Houses have increased by 3.11 times since 2001, a 3.3% rise in the last quarter and a 6.7%
rise in the last year. The average price is currently 20.4 million up from 6.5 million in December 2000.


SNAP SHOTS:

• Apartments include apartments, duplexes and triplexes.
• Property values for Apartments have increased by 2.43 times since 2001, a 1.3% rise in the last quarter and a 1.5% rise in the
last year. The average price for an Apartment is currently 12.7 million up from 5.2 million in December 2000.



SNAP SHOTS:
•The Hass Composite Letting Index is representative
of all property for rental in Kenya
• Rents have increased by 3.29 times since 2001
• The index shows rents have risen by 2.7% in the last
quarter but have risen by 9.7% in the last year.

 

 

 

 

 


SNAP SHOTS:

• The annual average is representative of the average rent of all properties offered to let in Kenya.
• The average rental for a property has gone from Kshs. 38,516 in December 2000 to Kshs. 126,576 in
June 2014.
• The average rent for a 4-6 bedroom property is currently Kshs. 196,041
• The average rent for a 1-3 bedroom property is currently Kshs. 72,030

 

 


SNAP SHOTS:

• The Mix by Year is a measure of the percentage that each type of property represents in the market.
• In 2001, Apartments took up 45.3% of the market, Semi-detached Houses took up 20.5% of the market
and Detached Houses took up 34.1% of the market.
• In June 2014 however, Apartments took up 54.3% of the market, Semi-detached Houses took up 20.0% of the market and Detached Houses took
up 25.7% of the market.

 


SNAP SHOTS:

• Detached houses include stand alone houses, bungalows, cottages and villas either on their own plot or in a gated community.
• Rental values for Detached Houses have increased by 3.40 times since 2001, a 2.4% rise in the last quarter and an 8.5% rise in
the last year. The average rental for a Detached House is currently Kshs. 193,780 up from Kshs. 56,959 in December 2000.


SNAP SHOTS:

• Semi-Detached houses include townhouses and maisonettes that are semi-detached or terraced.
• Rental values Semi-detached Houses have increased by 3.15 times since 2001, a 3.2% rise in the last quarter and an 16% rise in
the last year. The average rental is currently Kshs. 134,350 up from Kshs. 42,688 in December 2000.


SNAP SHOTS:

• Apartments include apartments, duplexes and triplexes.
• Rental values for Apartments have increased by 3.17 times since 2001, 3.2% rise in the last quarter and a 8.2% rise in the last
year. The average rent for an Apartment is currently Kshs. 73,652 up from Kshs. 21,638 in December 2000.

 

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Did you know

Buy-to-let gains recovering as

mortgage prices fall

  • Mortgage rates have dropped sharply in the last two months
  • The best mainstream mortgage offer is now Barclays at 15.5 per cent
  • The highest mainstream mortgage offers are now from National Bank and Chase Bank at 22 per cent
  • The comprehensive cuts have seen the average mortgage rate move to 19 per cent, from 22.5 per cent in the second
    quarter
  • Foreign currency mortgages are being made available at much lower rates still, from 9 to 10.25 per cent, but carry
    heavy exchange rate risk
  • The third quarter brought a sharp recovery in the combined returns from rents and house price rises for buy-to-lets, to
    13.12 per cent in September, up from 6.81 per cent in June 2012

Mortgage rates declined, in some cases by as much as 6 percentile points, in the third quarter of 2012, reported The
Mortgage Company in its quarterly mortgage report.
At the same time, the returns from buy-to-lets jumped sharply, significantly narrowing the gap between returns and
borrowing costs.
The biggest rate cuts since June came from Barclays, which cut its mortgage rate by 6.4 percentile points, to offer the
currently lowest mortgage rate in the mainstream market, at 15.5 per cent.
Other notable cuts came from HFCK, which cut its rates by 5 percentile points to 18 per cent, and Equity Bank, which cut
its rate by 3 points to 21 per cent.
However, many mainstream banks were slow to follow, finally announcing cuts this week. This latest realignment has
moved the average mortgage rate to 19 per cent, and sees National Bank and Chase Bank topping the league for the
country's most expensive mainstream mortgages, at an annual interest rate of 22 per cent.
“Some mortgage takers are really suffering through holding mortgages with some of the country's most expensive
suppliers - in some cases now paying several hundred thousand shillings in extra interest payments a year,” said Ms Carol
Kariuki, the MD of The Mortgage Company (TMC).
“This, alone, brings home the need for full information flows on the different mortgage rates available in the market, so
that consumers can choose genuinely competitive mortgage offers,” she said.
TMC also published its first league table on the foreign currency mortgage rates available in Kenya from I&M Bank, CFC
Stanbic, CBA, Equity Bank and Bank of Africa.
“With interest rates on these mortgages running at between 9 and 10.25 per cent, these mortgages are currently far
cheaper than shilling-denominated mortgages, but mortgage takers need to take great care with foreign currency
mortgages, where repayments are in dollars, pounds or Euros. When the exchange rate moves against them, it can leave
them carrying huge extra burdens in buying the foreign currency for their mortgage repayments,” said Ms Kariuki.
For mortgage financed landlords, who for the last decade, were earning more from rent and house price appreciation
than they were paying in mortgage interest, the last year brought a marked dip into negative returns.
However, the gap between gains on buy-to-let houses and pay-outs on mortgage interest narrowed sharply in the third
quarter, with buy-to-let returns climbing to reach 13.81 per cent by September, from 6.81 per cent in June.

Total returns on mortgaged house purchases

A comparison of the costs of a variable mortgage, versus the gains in house price appreciation and rental
income in each year.

How recent rate cuts are leading to

big savings on repayments

Scenario: A Kshs. 10m mortgage (20% deposit) over 20 years based on the
best rate available at that time.

SNAP SHOTS

A 3.5% rate cut from April 2012 to October 2012 led to a 16.5% reduction in monthly repayments.
A 2.1% rate cut from April 2012 to July 2012 led to a 11% reduction in monthly repayments.
A 1.4% rate cut from July 2012 to October 2012 led to a 6% reduction in monthly repayments.

Preferential Rate Mortgages

Did you know that high net worth individuals and preferential clients can sometimes get better rates?

Mortgages available to the diaspora

At a glance, banks best rates for foreign currency mortgages available to those earning an income in
US Dollars, GB Pounds or Euros including but not limited to the diaspora.

How Kenyan property yielded better returns for the diaspora

over the last ten years

Scenario: Buying a Kshs. 10m home in Kenya with a 20% deposit and a 9%* interest rate over a 10 year period yielded
a return of Kshs. 18.9m while buying a home in the US with a 20% deposit and a 3%* interest rate over a 10 year period yielded
a return of Kshs. 3.7m. This is because property in Kenya over the last ten years has appreciated on average 331%
versus 50% for US properties. *Return is calculated by subtracting total cost of home from value of property at period end

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