Kenya’s property market is experiencing significant strain due to ongoing economic challenges with auctioneers increasingly seizing high-value assets across various sectors.
This trend is affecting even well-established businesses, highlighting the severity of the financial difficulties facing the country.
A notable example of this trend is the upcoming auction of assets from the former Intercontinental Hotel in Nairobi, scheduled for August 29, 2024.
Garam Investments Auctioneers has announced the sale of a wide range of hotel equipment, including cold rooms, reception counters, and exercise machines. The auction comes with stringent participation requirements including a refundable deposit and rapid payment terms.
Further exemplifying the widespread nature of these challenges, Integra Auctioneering (K) Company has scheduled the auction of Osotua Luxury Resort in Naivasha for September 10, 2024.
This expansive property, boasting 30 studio apartments, villas, and various luxury amenities, is being sold along with nearly 10 acres of land. The sale’s conditions are equally demanding, requiring substantial deposits and swift payment of the purchase price.
The real estate market in Kitengela, Kajiado County, is also feeling the effects of the economic downturn. Nguru Auctioneers has announced the auction of several vacant plots in prime locations near significant landmarks.
Concurrently, the Ministry of Transport is conducting its own auction of vehicles, ranging from Toyota Corollas to high-end Toyota Prados. The factors driving these auctions are multifaceted and rooted in Kenya’s broader economic challenges.
The country has been grappling with high inflation, political instability, and the lingering effects of the COVID-19 pandemic. The Central Bank of Kenya reported an increase in the ratio of gross non-performing loans to gross loans, rising from 13.3% in December 2022 to 14% in February 2023.
This uptick indicates a growing number of borrowers struggling to meet their financial obligations, prompting financial institutions to intensify asset seizures and auctions.
The real estate sector, once a driver of economic growth, has been particularly hard hit. Despite a brief recovery in 2022, fueled by increased investor confidence and government infrastructure projects, the sector now faces significant headwinds.
Rising operational costs have further exacerbated the challenges faced by businesses thus leading to an increase in distressed property sales. The impact of these economic pressures extends beyond the hospitality sector, affecting retail and residential property markets as well.
While the average rental yield for office spaces saw a slight increase to 7.35% in 2022, this improvement was insufficient to offset the broader economic challenges. The retail sector, which had previously experienced aggressive expansion, is now witnessing a slowdown as consumer spending declines.
