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Last Updated: Oct 05, 2016




Values in Kenya’s residential property market continue to rise sharply, amidst robust economic growth and a sharp increase in the population of middle-class and expats. Residential property values in Kenya have risen by a staggering 4.34 times from 2000 to Q2 2016, according to Hass Consult.

During the year to end-Q2 2016, the Hass Composite Property Sales Index, a measure of asking sales prices of residential properties, rose by 16.6%, after y-o-y increases of 14.6% in Q1 2016, 9.6% in Q4 2015, and 7.5% in Q3 2015, based on a report released by HassConsult Limited. Quarter-on-quarter, residential property prices increased 4% in Q2 2016.

The Hass index is based on 4,000 to 6,000 properties tracked across Kenya, which are collected from multiple estate agencies and all publicly available house sales, including in property magazines, property websites and the national media.

The average value of a residential property in the country surged to KES31.1 million (US$307,100) in June 2016, from just KES7.1 million (US$70,110) in December 2000, according to HassConsult. The average price for a 1-3 bedroom residential property is currently KES14.1 million (US$139,233). On the other hand, the average price for a 4-6 bedroom residential property is KES47.6 million (US$470,034).

By property type, detached houses saw the highest quarterly price increase of 5.2% in Q2 2016, followed by apartments (3.6%), and semi-detached houses (0.7%), according to Hass Consult.

Langata, a suburb in Nairobi that consists of many small housing developments, recorded the biggest rise in house prices of 17.6% during the year to Q2 2016, followed by Karen (16.6%), Gigiri (12.4%), Muthaiga (11.1%), Nyari (10.9%), Runda, and Spring Valley (10.7%), and Kitisuru (10.3%). Among the capital city’s suburbs, only Kilimani (-5.4%) and Donholm (1.6%) saw falling prices over the same period.

In Kenya, most property purchases are for cash. Because of this, the mortgage market remains underdeveloped.

Nevertheless, the performance of the property market could be further improved if commercial banks lowered interest rates, according to Hass Consult.

This is supported by Chetan Hayer of real estate developer Nirbhau Group, who said that financing remains very costly in Kenya, not just for buyers but for developers as well. “We need to reform the way that mortgages are structured to ensure funding can be released during construction, not just when properties are completed,” said Hayer.

Kenya property price changeKenya’s economy grew by 5.6% last year and is expected to expand by more than 6% this year and in 2017, according to the International Monetary Fund (IMF), making the country one of the fastest-growing economies in Sub-Saharan Africa. The central bank cut its key interest rate by 50 basis points to 10% in September 2016, to buoy economic growth.

Foreigners can freely buy ‘commercial class’ land in Kenya. This type of land is for income or revenue-making purposes.

Analysis of Kenya Residential Property Market »


RENTAL YIELDS
Last Updated: Sep 30, 2016



Nobody would say that Nairobi is inexpensive.  A nice big house can cost $1.1 million in what is still a poor country.  But the rental returns are rather good.
  • A 3 bedroom apartment in an elite district of Nairobi can be bought for around US$200,000.
  • A 3 bedroom house may go for US$500,000, and a 5-bedroom house may go for US$1.1 million.
  • Townhouses are somewhere between these two prices.

How much will you earn? Gross rental yields on Nairobi apartments are moderately good, at around 6.0% to 7%.   Townhouses yield around 5.0% to 6.0%.  Yields on detached houses are lower, at 4% to 5.5%.

Conclusion: Nairobi property is attractive, with significant capital gains potential.  The best combination of rental yield and capital gains seems likely to be offered by townhouses.

Round trip transaction costs are very low in Kenya. See our Property transaction costs analysis for Kenya and Property transaction costs in Kenya, compared to the continent.

Read Rental Yields  »



TAXES AND COSTS
Last Updated: Mar 08, 2016



Rental Income: Kenyan gross rental income earned by a nonresident individual is subject to tax, withheld at source at 12%.

Capital Gains: No tax is levied on capital gains realized from the sale of real property.

Inheritance: There are no inheritance or gift taxes.

Residents: Residents are taxable on worldwide income at progressive rates, from 10% to 30%.

Read Taxes and Costs  »



BUYING GUIDE
Last Updated: Mar 04, 2015



In the absence of corruption (which is virtually impossible in Kenya) the total round-trip transactions cost would be around 4.76% to 6.76%, inclusive of the 1.25% real estate agent’s commission.

The whole process for the titling of the property can typically be completed in around 72 days.

Real estate transactions are normally quoted and concluded in Kenyan Shillings (KES).

Read Buying Guide  »



LANDLORD AND TENANT
Last Updated: Jul 05, 2006



Kenya housesKenyan rental market practice is pro-landlord.

Rent: There is no rent control at the upper end of the market. Prior to occupancy, the tenant normally pays a quarter’s rent in advance and an additional one month’s rent as security deposit.

Tenant Evictions: Landlords carry out evictions themselves, even if the law mandates that only the courts can order an eviction. Landlords can also seize the tenant’s possessions for compensation of unpaid rents.

Read Landlord and Tenant  »



ECONOMIC GROWTH
Last Updated: Oct 05, 2016


Economy growing strongly, but high unemployment and poverty persist

Kenya GDP inflationKenya is sometimes known as the “cradle of humanity.” Many believe the bones of our oldest ancestors lie in the Great Rift Valley. Great safari destinations, with abundant wildlife and beautiful scenery, tourism and horticulture have become major foreign exchange earners, rivaling the tea industry (Kenya is the world’s third largest tea exporter).

After a prolonged economic stagnation because of corruption and strict regulations, the country is now showing robust economic growth. The economy grew by an average of 6.3% from 2010 to 2013.

In September 2014, Kenya effectively joined the ranks of middle-income countries. This was mainly due to the ‘rebasing’ of the economy, which resulted to a 25.3% upward revision of Kenya’s GDP in 2013 from a previous estimate of US$42.6 billion to about US$55.2 billion, according to Kenya National Bureau of Statistics (KNBS). The statistical reassessment makes it the 9th largest economy in Africa, surpassing Ghana, Tunisia and Ethiopia. The country’s real GDP growth rate in 2014 was also revised upwards to a robust 5.7%, from an earlier estimate of 4.7%. In addition, Kenya’s GDP per capita was also increased to US$1,246, from just US$994 in 2013. In 2015, GDP per capita stood at US$1,388.

Kenya’s economy grew strongly by 5.6% last year and is expected to expand by more than 6% this year and in 2017, according to the International Monetary Fund (IMF), making it one of the fastest-growing economies in Sub-Saharan Africa.

Despite this, Kenya’s poverty index remains high and the country has still the highest number of slums in Africa. In fact, almost 20 million Kenyans, about 42% of the population, live on less than 1 dollar per day.

According to a World Bank report, Kenya has been thwarted by stagnating agriculture and manufacturing industries, falling exports, and low household savings rate that can be tapped for investment in local industries and infrastructure. Worse, government corruption persists.

High youth unemployment remains a serious problem. Kenya’s youth unemployment now stands at 17.3%, almost three times higher than neighboring Uganda and Tanzania. Moreover, around 80% of jobs in the country are in the low-paying, less productive informal sector.

Agriculture remains the backbone of Kenya’s economy, contributing an average of about 25.4% of GDP every year. But manufacturing, Information and Communication Technology (ICT), and real estate are expanding.







  • Pro-landlord rental market
  • Moderate yields in Nairobi
  • Corruption & poverty woes
  • Security & political concerns
  • High rental income tax of 30%
RESIDENTIAL PROPERTY FACTS
Price (sq.m): $1,687 For a 120 sq. m. property, usually an apartment.
Rental Yield: 6.66% For a 120 sq. m. property, usually an apartment.
Rent/month: $1,123 For a 120 sq. m. property.
Income Tax: 22.50% Assumptions: Owners are a non-resident couple drawing US$ / €1,500 per month in rent, with no other local income.
Roundtrip Cost: 5.13% The total cost of buying and then reselling an apartment. Includes:

* all transaction taxes and charges:
* lawyers' and notaries' fees
* agents' fees

Assumptions: The buyers are non-resident foreigners. The apartment cost US$250,00 / €250,000.
Cap Gains Tax: n.a. Assumptions: The property was bought for US$250,000 / €250,000, and sold 10 years later, after a 100% appreciation.
Landlord and Tenant Law: Pro-Landlord Rating is based on a detailed study of each country’s law and practice.

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