Prices of houses in Kenya are on steep rise as the real estate sector develops rapidly and developers seek higher returns on their investments.
The cost of two, three and four bedroom houses, which are popular with most Kenyan families, have skyrocketed in the past months.Data from various real estate and housing development firms indicate that a two bedroom house in the East African nation is going for between 44,048 U.S. dollars and 90,000 dollars. About three years ago, a two bedroom house in the East African nation would go for between 35,714 dollars and 60,000 dollars.
While prices are rapidly rising across Kenya as more developers join the sector, it is in the capital that prices have increased sharply ensuring that houses remain out of reach of the average working Kenyan.
In Nairobi, the price of a two bedroom house ranges averagely between 44,048 dollars and 90,000 dollars. However, the prices depend on the location of the houses, whether in low, middle or high income areas. In high income areas, prices of a two bedroom house climb as high as 95,238 dollars. Similarly, for three bedroom houses, prices vary from 78,350 dollars for those located in low-income and outside Nairobi and 140,285 dollars in high-end suburbs. Things are not different with 4 bedroom apartments where prices vary between 117,261 dollars and 267,095 dollars in exclusive suburbs of the capital.
Interestingly, most of the houses are not standalone units with own compounds but high-rise apartments.This means developers are maximally using land as they seek to reap big from their investments. On a quarter an acre piece of land, for instance, most developers are constructing two blocks of three storey buildings, each comprising of nine houses.
The trend has gained currency in recent years as land becomes scarce and prices rise in the capital. Some years back, recalled retired government worker Benjamin Oworo, most developers would go for standalone houses, ensuring families have own compounds. "Then, developers would buy huge tracts of land and built several bungalows and maisonettes comprising of two, three and four bedroom houses," Oworo, who owns two three bedroom houses in Komarock estate recounted on Tuesday.
The houses, according to Oworo used to be sold at between 29, 761 dollars and 71,428 dollars. "This made sense because one would have own compound, giving them room to build smaller houses on the plot or extend their houses," he recalled. But, according to the retired accountant, things have changed greatly in the housing sector in the capital.
"Prices of houses have doubled and standalone houses are no longer favoured by developers. They are building apartments, which they are selling highly yet you cannot even extend the houses when you want," he said.
Oworo bought two houses. One under his name and the other he co- owns with his wife. Both of the houses he bought on mortgage and successfully completed paying, a feat that is currently impossible for many home seekers in the East African due to high credit rate. "I bought the two houses at 65,385 dollars.Those who were paying cash got better deals. Things were better then. There were still some controls and not many people had entered the sector," he said, noting that prices of most houses currently are blown up.
The 57-year-old said his two houses currently will fetch about 86,309 dollars each. "If I decide to sell them, I would make huge profits because they are standalone houses, which people want but developers are not building," he said. Antony Kuyo of Avent Property Agents in Nairobi's eastlands area blamed the high cost of houses on rise in prices of land and building materials. In the capital, a quarter piece of land is going at between 14,285 dollars and 47,619 dollars.Prices depend on the neighbourhood the
land is located, with those in high-income areas selling expensively. "The high prices of land, which keep on appreciating, push up the prices of houses since a developer would want to make return on investment," he said.
The property agent noted that high land prices have made developers switch to apartments, which offer better returns. "If you build apartments, for instance, on an acre piece of land, you will get better returns than building standalone houses," he said.Kuyo noted that prices of building materials namely cement, roofing materials and interior decor have equally increased."You cannot build a house today and fail to finish its floors with tiles and hope people will buy. They will not. This is what has also increased prices of houses. Developers will give people what they want and charge accordingly," said Kuyo.
However, he acknowledged that some developers exaggerate prices of houses making them unaffordable."If one sells a 4 bedroom house at 14,285 dollars in middle- income suburbs, as I see some people do, this is extremely high. Such a house should go for a maximum of 11,306 dollars, which is reasonable," he said.Kenya's real estate sector has grown over the years into a multi-billion dollar industry, with the number of players increasing faster.The sector is one of the drivers of the East African nation's economy, a fact that was recently recognised by Kenya Revenue Authority when it ordered all landlords to start paying tax.
Growth of the sector has boosted production of cement and roofing material, among other things related to building industry. The latest Kenya National Bureau of Statistics report on the economy indicated that the East African nation consumes an average of 350,000 metric tonnes of cement each month, up from 250,000 metric tonnes in 2010.
Similarly, City Council of Nairobi approves an average 12,000 residential and non-residential building plans each month.