Why realtors are finding it hard to sell
Real estate agents are struggling to find buyers as landlords offload blocks of flats onto the market amidst low demand.
The revelation comes on the back of low occupancy levels as hard pressed families exit to cheaper addresses, leaving landlords struggling.
“Investors are hesitant to buy because most apartments blocks have a high number of vacant units hence the low returns,” said Hayview Realtors chief executive officer Bonface Marani.
Marani points out that some apartment blocks had been occupied by institutions, and since it is not certain when schools will reopen, the landlords will struggle for sometime.
“You find that in an apartment block of 60 units, 20 are vacant, this means the buyer cannot start making returns. What to do?” said Marani.
Sector analysts further say even though banks agreed to restructure loans, they are merely adding unpaid interest on principal.
Interest rate
“When banks agreed to restructure loans they embarked on interest rate capitalisation such that interest payments were now added to principle and those loans present a bigger challenge,” said Johnson Ndege a property analyst at Cytonn Investment.
Prices in the so called middle class segment have also stagnated due to oversupply as there is minimal demand at the moment because most savings were either wiped out or in bad shape.
Charles Mureithi a real estate agent says some landlords are cutting prices to offload assets for various reasons including fear of auction.
“Supply is high and it is beginning to attract bargain hunters, especially in cases where owners cannot wait for the situation to improve,” said Charles.
With massive unemployment, wage cuts, business failures and job uncertainty, many people are moving out to cheaper houses at the bottom of the market, with some opting for alternatives upcountry.
Dawamireal Home Ltd agents noted that the said demand is way lower than the same period last year.
Most of the blocks of flats on sale were going for between Sh25 million and Sh150,000.
Most of those selling can be found in areas such as Pipeline, Kikuyu, Kiambu, Zimmerman, Roysambu, Utawala and other satellite towns in Nairobi and Mombasa.
Some of the houses are empty after tenants left for cheaper options due to the Covid-19 pandemic forcing some owners to sell instead.
Loan restructuring
Lenders said they have restructured over Sh1 trillion worth of loans since the beginning of the Covid-19 pandemic.
This means that the properties are accumulating interest over the period, and borrowers will be required to pay up once they resume paying their loans.
To keep tenants, some landlords have been forced to slash rent, however, this is counterproductive as it affects their ability to service loans. Landlords had started cutting prices as early as February .
The pain for landlords started when hotel industry, manufacturing, travel and many others sectors laid off most of their workers, making them unable to pay rent. This has left landlords with a stark of vacant units.
Kenya Bankers Association (KBA) in their latest property market index said demand for all types of houses remained depressed with concluded sales in the second quarter being down 40 per cent.
The lobby estimates that property transactions are falling by double digits.
