Report: Rents fall as low demand slows down city land prices – HassConsult

Housing has been one of Kenya’s fastest growing sectors over the last decade, fuelled by a growing middle class, with returns from real estate outpacing equities and government securities.

This fuelled a boom in land prices whose prices have increased nearly four-fold in Nairobi and surrounding satellite towns like Kiambu, Ongata Rongai and Kitengela.

The feverish rise in house and land prices has led to a bubble, setting the stage for multi-billion shilling loan defaults from property developers who had pegged their bets on Kenya’s real estate.

Some companies, especially in the hospitality industry, have sought to suspend rent payments in the race to protect their liquidity amid a sales collapse after the State imposed tight lockdowns on public life to slow the coronavirus pandemic.

The pandemic has caused an economic slowdown, which could potentially further see adverse activity in the sector,” said Ms Hassanali.

“Apartments in Kitengela reported a 10.4 percent drop in rental prices, Mlolongo (-7.8 percent), Syokimau (-3.5) and Kiambu reported a three percent drop,” she said.

Rents in high-end estates like Kitisuru, Loresho and Spring Valley—which attract premium rates–dropped 7.7 percent, 7.3 percent and 6.5 percent respectively.

Rents dropped 0.2 percent in Donholm, but Westlands and Langata backed the trend with leasing costs rising 3.5 percent and 0.3 percent respectively

Land prices in Gigiri and Riverside dropped by the biggest margin of 7.2 percent while in Kilimani, Lavington and Runda fell by 2.3 percent, 2.7 percent and 1.9 percent.

But increases in Muthaiga (6.3 percent), Karen (2.5 percent) and Kitisuru (2.2 percent) as well an average rise of 6.5 percent in satellite towns of Ruiru, Ruaka, Kitengala and Juja helped to keep average prices higher.

Upper Hill is listed as the costliest location to buy land, with an acre there going for Sh530 million followed by Kilimani at Sh420 million, Parklands (Sh401 million), Riverside (Sh364 million) and Kileleshwa (Sh308 million).

The land prices boom in satellite towns has been driven by Kenya’s growing middle class who cannot afford property in the capital.

The high appetite for property saw coffee plantations in Kiambu cleared to pave way for gated housing estates and shopping centres.