Lower income leads to lower rents and property rates

A fall in incomes, which led to weak demand, led to lower residential and rental property prices in the Greater Kampala Metropolitan Area during the first quarter of the financial year 2021/22.

According to the Uganda Bureau of Statistics (Ubos), the Greater Kampala Metropolitan Area covers Kampala and parts of the urban district of Wakiso.

The decline in revenue was largely blamed on Covid-19-related disruptions which impacted growth momentum and improved housing estates and mortgage interest rates, according to Ubos.

When releasing the property price index in Kampala, Mr. Edgar Niymbiay, the senior statistician of Ubos, price statistics, said he noticed a drop in residential and rental property prices, in particularly on the sales and rental side.

During the period, he said, the steepest decline was seen in Kampala, spreading to selected parts of Wakiso district.

“Property dealers don’t have buyers. So they opted to sell at lower prices,” Niymbiay said, noting that the sector’s performance had been mixed but had been showing steady declines since June.

According to data from Ubos, during the period ended September 30, the Residential Property Price Index, which is a subset of the House Price Index, decreased on average by 12.6%, compared to a growth of 5.6% recorded in the fourth quarter of 2020/21. trimester.

During the period, Ubos noted that in Kampala property prices in the Kawempe and Rubaga cluster fell by 18.7% compared to Kampala Central and Makindye which saw a decline of 14.7%. %.
Nakawa, which is a full-fledged cluster in Kampala, saw a price drop of 7.9%.

As a result, the report notes, Kampala experienced an average decline of 13.7% over the period.

This decline was contrary to an increase of 5.5% (Kawempe and Rubaga), 1.4% (Kampala Central and Makindye) and 9.7% (Nakawa) during the fourth quarter of the 2020/21 financial year.

In Wakiso, real estate prices fell by 8.5% during the period, compared to an increase of 8.8% in the fourth quarter of 2020/21.

The general decline has led to a reduction in related products and services, particularly with regard to granting and applying for credit.

For example, in its report on the performance of the economy for the period ending in August, the Ministry of Finance stated that the extension of construction credit fell by more than 50% between June and July due to the growth of risk associated with the real estate sector.

Since the beginning of the year, banks have been cautious when lending to sectors they considered high risk in terms of repayment.