Decline in earnings forces drop in rent, property rates
What you need to know:
- Property dealers have experienced a drop in demand resulting from a fall in incomes, especially in Kampala and Wakiso District.
- 13.7 per cent decline: The percentage decline for property and rent rates for Kampala during the period ended September 30.
A drop in incomes, which has resulted in low demand has seen residential and rental property prices fall in Greater Kampala Metropolitan Area in the first quarter of the 2021/22 financial year.
Greater Kampala Metropolitan Area, according to Uganda Bureau of Statistics (Ubos), covers Kampala and parts of urban Wakiso District.
The drop in incomes has largely been blamed on Covid-19-related disruptions that have impacted the momentum in growth and improvement of housing estates and mortgage interest rates, according to Ubos.
While releasing the Property Price Index in Kampala, Mr Edgar Niymbiay, the Ubos principal statistician, price statistics, said they had noticed a drop in residential and rental property prices, especially on the sale and rent side.
During the period, he said, the largest drop was witnessed in Kampala, spreading into some selected parts of Wakiso District.
“Property dealers don’t have buyers. So, they have opted to sell at lower prices,” Mr Niymbiay said, noting the performance in the sector had been mixed by but has since June posted consistent declines.
According to data from Ubos, during the period ended September 30, Residential Property Price Index, which is a subset of the Property Price Index, declined by an average of 12.6 per cent compared to a 5.6 per cent growth registered in the 2020/21 fourth quarter.
During the period, Ubos noted that within Kampala, property prices in the Kawempe and Rubaga cluster declined by 18.7 per cent compared to Kampala Central and Makindye, which experienced a 14.7 per cent drop.
Nakawa, which a cluster of its own within Kampala, experienced a price drop of 7.9 per cent.
Therefore, the report noted, Kampala experienced an average decline of 13.7 per cent during the period.
The decline was contrary to an increase of 5.5 per cent (Kawempe and Rubaga), 1.4 per cent (Kampala Central and Makindye) and 9.7 per cent (Nakawa) during the fourth quarter of the 2020/21 financial year.
In Wakiso, property prices declined by 8.5 per cent in the period compared to an 8.8 per cent increase in the 2020/21 fourth quarter.
The general decline influenced a reduction in associated products and services, especially in regard to credit extension and demand.
For instance, in its Performance of the Economy report for the period ended August, the Ministry of Finance, said credit extension to construction had declined by more than 50 per cent between June and July due growth in risk associated with the real estate sector.
Banks have since the beginning of the year been cautious while lending to sectors that they consider high risk in terms of repayment.