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Feb 15, 2018

Kenya’s house prices are now falling rapidly, amidst political uncertainty

by Lalaine C. Delmendo


After seven years of strong house price rises, Kenya’s residential property market is now slowing sharply, as political uncertainty persists after petitions have been filed before the Supreme Court to overturn Uhuru Kenyatta’s victory in the October repeat election.

During the year to Q3 2017, the Hass Composite Property Sales Index, a measure of asking sales prices of residential properties, fell by 5.1%, in sharp contrast with a y-o-y rise of 10.4% during the same period last year, based on a report released by HassConsult Limited. It was the second consecutive quarter of y-o-y price declines after falling by 2.2% in Q2 2017.

Quarter-on-quarter, residential property prices dropped 1.8% in Q3 2017.

“Buyers are sensitive to risks associated with the political process and are therefore unlikely to make decisions until there is an end to this period,” said Sakina Hassanali, Head of Development Consulting and Research at HassConsult.

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 KES29.8 million (US$287,367) in September 2017, from just KES7.1 million (US$68,467) in December 2000 – equivalent to about 4.2 times increase, according to HassConsult. The average price for a 1-3 bedroom residential property is currently KES13.6 million (US$131,148). On the other hand, the average price for a 4-6 bedroom residential property is KES43.1 million (US$415,622).

Several Nairobi suburbs registered nominal house price rises. Muthaiga, Nairobi's long-established Beverly Hills, registered a rise in house prices of 12.5% during the year to Q3 2017, followed by Loresho (8.9%), Langata (7.6%), Nyari (6.5%), Kitisuru (4.6%), Gigiri (4.6%), Spring Valley (2.6%), Karen (2.1%), Eastleigh (1.5%), Ridgeways (1.4%), and Runda (1%). However when the 7.06% inflation rate in end-Q3 2017 is taken into consideration, real house prices in most Nairobi suburbs have actually declined year-on-year during the period.

Among the capital city’s suburbs, Kilimani, one of Nairobi’s affluent neighborhood, registered the biggest decline in nominal house prices of 9.2% during the year to Q3 2017, followed by Upperhill (-9%) and Kileleshwa (-8.3%). Minimal house price declines were also seen in Lavington (-1.9%), Parklands (-1.6%), Donholm (-1.2%) and Westlands (-1.1%). The decline is obviously bigger when adjusted for inflation.

In Kenya, most property purchases are for cash. Because of this, the mortgage market remains underdeveloped. In 2016, the size of the mortgage market was equivalent to just over 3% of GDP and there were fewer than 25,000 mortgage loans outstanding – highlighting the inaccessibility of housing finance.

Kenya residential property price

Political uncertainty is now adversely impacting the housing market. Uhuru Kenyatta, the son of Kenya’s founding president Jomo Kenyatta, took up his father’s mantle to become head of state in April 2013. He was re-elected for a second term in the August 2017 general election, but after opposition protests the Supreme Court declared the election null and void because of irregularities. Kenyatta was also declared winner of the October re-run, which was boycotted by the opposition. Currently, petitions to overturn Kenyatta’s victory in the October repeat election are pending before the Supreme Court.

Yet Kenya’s economy remains robust. In 2016, the economy expanded strongly by 5.8%, slightly up from a 5.7% growth in 2015, according to the International Monetary Fund (IMF), making it one of the fastest-growing economies in Sub-Saharan Africa.

In Q2 2017, the economy grew by 5%, after growth of 4.7% the previous quarter and 6.3% during the same period last year, according to Kenya National Bureau of Statistics (KNBS). The economy is projected to expand by a healthy 5% this year and by another 5.5% in 2018.

Land prices continue to rise

Land prices in Nairobi rose by 3.2% during the year to Q3 2017, according to HassConsult. Langata registered the biggest y-o-y rise of 8.5% in Q3 2017, followed by Muthaiga (8%), Eastleigh (8%), Donholm (7.2%), Karen (6.8%), Spring Valley (5.9%) and Runda (5.8%). Among the 18 Nairobi suburbs included in the land price index, only Ridgeways recorded a price decline of 0.5%.

Upperhill had the country’s most expensive land, at an average price of KES543.4 million (US$5.24 million) per acre, followed by Kilimani, Westlands, and Parklands, with average prices of KES437.8 million (US$4.22 million), KES417.5 million (US$4.03 million) and KES410.1 million (US$3.95 million), respectively.

Nairobi land prices, Q3 2017

Nairobi Suburbs y-o-y change (%) Change from 2007 Average value (in mil KES per acre) Average value (in mil USD per acre)
Langata 8.5 5.52 Fold 59.4 0.57
Eastleigh 8.0 5.92 Fold 284.5 2.74
Muthaiga 8.0 5.25 Fold 139.3 1.34
Donholm 7.2 7.01 Fold 65.2 0.63
Karen 6.8 7.47 Fold 58.5 0.56
Spring Valley 5.9 4.22 Fold 158.4 1.53
Runda 5.8 6.00 Fold 83 0.80
Gigiri 5.5 6.54 Fold 229.9 2.22
Westlands 3.1 5.70 Fold 417.5 4.03
Kilimani 2.6 6.56 Fold 437.8 4.22
Upperhill 1.7 9.06 Fold 543.4 5.24
Lavington 1.6 5.67 Fold 235.1 2.27
Parklands 1.6 5.27 Fold 410.1 3.95
Kitisuru 1.2 5.52 Fold 76.9 0.74
Loresho 0.9 5.04 Fold 80 0.77
Kileleshwa 0.5 6.99 Fold 287.6 2.77
Nyari 0.1 6.16 Fold 102.7 0.99
Ridgeways -0.5 5.92 Fold 68.5 0.66
Source: HassConsult

A shift to smaller, lower priced properties

As the affordability of detached houses has deteriorated over the past 15 years, homebuyers have been shifting to lower priced property types. Apartments took up 40.7% of sales in Q3 2017, up from just 23.5% in 2001. Semi-detached houses accounted for 18.7% of sales in Q3 2017 while detached houses accounted for about 40.6% of the market, a significant change from 2001, when semi-detached houses made up around 25% of sales and detached houses more than half.

“With most existing standalone houses in high development areas like Lavington, Spring Valley, Loresho, and Kileleshwa having been converted to apartments, there are less standalone houses in the suburbs,” said Hassanali.

Foreign demand is increasing

Kenya gdp per capita

Foreigners are buying more in Kenya. Foreigners generally prefer the area within an arc from Nairobi’s south west to north east.

In the Parklands area of Nairobi, demand is high and property is being snapped up by moneyed Asian investors. Because of security concerns and the recent breakdowns in the provision of the basic utilities, there is increased demand for accommodations within secure compounds with their own water supply and back-up generator.

Foreigners can freely buy ‘commercial class’ land in Kenya.

“Kenya’s property market has potential for higher rates of return compared to other jurisdictions. It is also relatively easy for foreign investors to enter Kenya’s real estate sector,” said Nathan Luesby of Jenga Web Ltd.

The country has showed impressive improvements in transparency mainly due to the increased regulation of the real estate market as Kenya aims to become an economic hub for East Africa, according to JLL. Private companies and other international advisors increasingly provide consistent data for the Kenyan real estate market.

In 2013, Real Estate Investment Trust (REITs) structure and tax dispensation for companies were introduced, and the country’s listed property market has developed considerably over the past few years. Since the introduction of REITs, international investors, particularly from South Africa, have flocked into Kenya’s property market.

Because of these positive developments, Kenya was included on the list of seven emerging real estate markets to watch for in 2016 by global real estate platform Lamudi. Two years earlier, Kenya topped the global list of most improved real estate markets in the Global Real Estate Transparency Index released by Jones Lang LaSalle (JLL).

Kenya’s most attractive residential areas

A quick tour of high-end residential neighborhoods, including Gigiri, Runda, Muthaiga, Lavington, Karen, Machakos County, Kajiado County, Nyali, and Shanzu.


Gigiri is home to the country’s largest expatriate community and is one of the capital's poshest suburbs. It houses the UN Environmental Programme, making it the only African city to host a major UN body. Gigiri’s Village Market hosts the International Civil Aviation Organization Base for Eastern and Southern Africa.

Runda, Muthaiga, Lavington, and Karen

These locations host rich Kenyans and high net worth individuals, though recently, more townhouses have been being built here rather than villas and mansions.

Machakos County (East Metro)

Because of skyrocketing house prices in the city centre, people are now moving to areas on the outskirts of Nairobi, such as Athi River in Machakos County. Under the Nairobi 2030 Master Plan, Machakos County will be developed as a dormitory town for Core Nairobi.

Konza Techno City

Dubbed as “Africa’s Silicon Valley”, Konza Techno City will become the country's single largest property development. Begun in January 2013, the US$14.5 billion project is scheduled for completion by 2030.

Kiambu (North Metro)

Kiambu County has seen many developments since the road connecting it to Core Nairobi was expanded.  An example is Tatu City, begun in 2013 with an estimated cost of US$2.5 billion.

Kajiado (South Metro)

Kajiado County is home to some of the country’s richest people, especially those who work in the city centre. Its poshest neighborhoods include Ngong, Kiserian, Kitengela, and Ongata Rongai.


A popular tourist destination. Nyali, a high-end residential area in Mombasa City, has some of Kenya's most expensive homes, and numerous high-class hotels and long white sand beaches.


Shanzu is an affluent neighborhood in Mombasa, with high-end residential developments. It is popular for its pristine beaches, numerous hotels, bars, and restaurants.

Security remains a serious problem in Kenya. Violent criminal attacks, including burglaries, home invasions, kidnappings, and carjackings, can occur any time in any location. Only selected places are suitable for housing, especially for foreigners.

Housing shortage remains high

More than 200,000 homes need to be built a year, but only 50,000 new units are being built annually, according to Lands Cabinet Secretary Jacob Kaimenyi, leaving around 150,000 Kenyans un-housed every year with middle-income earners and students in urban areas most affected.

In Nairobi, more than 67% of all residents live in informal settlements.  The proportion of owner-occupied households in the urban areas currently stands at just 18%, compared to 82% in rural areas.

The huge demand:supply gap is aggravated by property developers concentrating on building houses for the high-income earners, says Elizabeth Nkulu of Cytonn Investments.

To ameliorate the situation, the government, with the help of the private sector, is launching an ambitious housing development project. “The Ministry of Housing seeks to accelerate development and access to affordable and adequate housing through public private partnership and plans to construct 300,000 units by the year 2017,” said former Cabinet Secretary for Lands, Housing and Urban Development Charity Ngilu. Moreover to encourage building, the Kenyan government recently lowered corporate tax for real estate developers to 20%, from 30%.

Nairobi has introduced an Urban Renewal Programme last year to redevelop several old residential estates, in an effort to improve the access to low-cost, affordable housing in the city. Accordingly, more than 100,000 new units are to be constructed through the comprehensive plan to accommodate about 650,000 people.  The first phase of the programme will involve the construction of about 10,200 units in various estates including the Jeevanjee, Pangani, Bachelor Quarters, and Old and New Ngara.

Mortgage market remains undeveloped

Kenya interest rates

Kenya’s undeveloped mortgage market is one of the primary reasons for its acute housing shortage. In 2016, its size was just above 3% of GDP and there were fewer than 25,000 mortgage loans outstanding.

In a recent report, the World Bank commended the role of Savings and Credit Cooperatives (Saccos) in providing affordable housing finance. The share of Saccos-financed housing in Kenya is estimated at about 90%, since banks do not consider housing finance to be attractive. 

“Saccos provide a credit for housing finance that is much more accessible and is provided at a cheaper rate as compared to what many banks can offer,” said Mehnaz Safavian of World Bank.

Chetan Hayer of real estate developer Nirbhau Group notes 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.

Rents are now falling

Kenya rental index

After six years of uninterrupted growth, residential rents are now falling. Nationwide residential rents dropped 1.8% y-o-y in Q3 2017, to an average of KES142,043 (US$1,370) per month, according to Hass Consult. Rents have risen by around 70% since 2007.

Among Nairobi suburbs, Langata recorded the biggest rent decline during the year to Q3 2017 of 10%, followed by Westlands (-6.8%), Spring Valley (-5.5%), Muthaiga (-4.4%), Kitisuru (-3.1%), and Kileleshwa (-3.1%). Other suburbs with minimal rent declines included Donholm (-1.4%), Loresho (-1.3%), Karen (-1.2%), Kilimani (-0.4%) and Lavington (-0.1%).

But rents are still rising in other Nairobi suburbs, particularly in Eastleigh, which recorded a rent increase of 8.9% during the year to Q3 2017, followed by Ridgeways (2%), Parklands (1.7%), Upperhill (0.4%), Runda (0.2%), Nyari (0.2%). Rents were unchanged in Gigiri.

In Q3 2017:

  • The average rent for a 1-3 bedroom residential properties stood at KES66,450 (US$641) per month
  • The average rent for 4-6 bedroom residential properties was KES235,230 (US$2,268) per month

Kenya has a large rental market, with about 84% of Kenyans currently renting houses.

Economy growing strongly, but high unemployment and poverty persist

Kenya’s economy expanded strongly by 5.8% last year, slightly up from a 5.7% growth in 2015, according to the International Monetary Fund (IMF), making it one of the fastest-growing economies in Sub-Saharan Africa. In Q2 2017, the economy grew by 5%, up from growth 4.7% the previous quarter and 6.3% in the same period last year, according to Kenya National Bureau of Statistics (KNBS).

Kenya’s economy is projected to expand by a healthy 5% this year and by another 5.5% in 2018, based on IMF estimates.

In September 2014, Kenya suddenly joined the ranks of middle-income countries due to the ‘rebasing’ of its economic statistics, which resulted in 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 the Kenya National Bureau of Statistics (KNBS). The 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 2016, GDP per capita stood at US$1,552.

The dark side of the economic picture

Kenya gdp inflation

Kenya's GDP may be growing rapidly, but so too is its population. The country has an average population growth rate of about 2.8% annually in the past five years. As a result its GDP per capita growth figures are quite poor. From 2012 to 2017, Kenya’s real GDP per capita grew by just 2.5%, on average, per year. In other words, for most people real economic progress has been very much less than the bare GDP figures would suggest.

Currently, Kenya’s GDP per capita was estimated at US$1,677 in 2017, according to the IMF.

Why has economic growth lagged?  According to a World Bank report Kenya's development has been held back by stagnating agriculture and manufacturing industries, falling exports, and a low household savings rate that can be tapped for investment. And of course there is rampant government corruption. 

That's why Kenya’s poverty index remains high.  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. Around 80% of all jobs are in the low-paying, less productive informal sector. 

Kenya also has the highest rate of unemployment in East Africa, according to the United Nations’ 2017 Human Development Index (HDI) report. Kenya’s youth unemployment now stands at 17.6%, almost three times higher than neighboring Uganda and Tanzania, according to the World Bank.   The country has one of the world’s highest dependency ratios at 75.4%, mainly due to the large number of youths (children under 15 years) in every Kenyan family.

Overall inflation slowed to 5.72% in October 2017, from 7.06% in the previous month and 6.47% in the same period last year, according to the KNBS.


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