Changing Face of Kenya's Real Estate
The cost of owning a home has in the past decade spiralled out of control leaving prospective buyers chasing a dream that is now no more than a mirage for most urban dwellers, especially in Nairobi.
But amid the diminishing prospects of the average worker ever becoming a home owner, a new housing project unveiled by the state last week offers potential buyers a peek into the totally disjointed property pricing.
While the project is developed exclusively for government employees in the middle level cadres, the home prices offer a rough guide on the construction costs and possibly an eye-opener for prospective home buyers scouring the market for the best property deals.
It is anticipated that the completion of more housing projects by the state for its workers will offers fresh hope for prospective buyers in the private sector that they too, can get housing that they can afford, where the government -funded homes act as a benchmark.
A spacious three-bedroom apartment in the newly-completed mixed use development in the sprawling Ngara estate is selling at Sh4.4 million, just about a quarter of the prices in the open market in neighbourhoods closest to the city centre .
Add to that the large open spaces set aside for children’s playgrounds and almost two parking slots for each of the 656 homes, it becomes clear that private developers may be stretching prices in the housing market to the upper limit, in the process fleecing those who may be willing to put their money in real estate.
Jeremy Bundi, one of the buyers in the government-backed project said it was an ‘unbelievable feeling’ to own a home in such a prime neighbourhood in Nairobi, less than 20 minutes away from the CBD, considering the experience he has had in the open market.
The project, sitting on a 10-acre piece of land consist of two and three bedroom apartments, a shopping centre and a nursery school in a gated community, developed at a total cost of Sh2.2 billion.
About three acres of land have been left for the development of flower gardens and other greenery for communal use.
Tirop Kosgey, the housing permanent secretary, said that the project is a redevelopment of a colonial era estate consisting of 74 bungalows, which were pulled down to allow for better utilisation of the land.
A two-bedroom apartment went for Sh3.4 million in the housing scheme, which has significantly altered the skyline of the rusty neighbourhood overlooking the city centre.
Homes developed by a private developer in Pangani area, a mile further form the CBD, have been listed at about Sh8 million with the buyers paying for them before the actual construction begins or is ongoing.
The cheapest home within the city neighbourhoods in the market now are studio apartments along Naivasha Road, placed in the market by real estate firm HassConsult for Sh3.45 million.
But that is the cash price for the 480-square foot apartment, in a payment plan that requires the buyer to pay in four installments over the construction phases of the homes.
Mortgage financed buyers in the ‘starter home’ as described by the seller is Sh3.95 million.
The real ‘starter home’ a studio apartment, commonly known as a bedsitter, has been developed by Suraya Property Group, targeting fresh college graduates, possibly starting out on the first job and is selling for Sh900,000 off Mombasa Road at Mlolongo.
Luckily for the civil servants, the government is also providing home loans under the scheme at mortgage rates of five per cent, meaning a buyer in a two-bedroom apartment will repay the loan at about Sh20,000 per month.
The mortgage repayment compares well with the rental prices that the targeted cadre of workers would be paying in private-owned homes around the same area.
New apartments around middle and upper income neighbourhoods like Kileleshwa and Hurlingham, measuring about 1100 square feet, are currently on offer for over Sh15 million.
At the prevailing mortgage rates of about 19 per cent, the monthly repayments for such homes exceed Sh150,000 a month for 20-year home loan.
This situation represents a dilemma for millions of urban dwellers who are increasingly being pushed to the periphery of home ownerships, with both home prices and expensive mortgage loans conspiring to relegate them to being perennial renters.
Buyers have now been forced to look in far flung areas that do not generally fall within the precincts of the city, say in Athi River and Thika, for cheaper options with the trend pointing to the possibility of an even worsening scenario.
Even in the satellite towns that the majority of new home owners are trooping towards, only a small proportion of them are buying already completed units.
Most prospective buyers are opting to acquire plots and gradually build their own homes.
Different developers have attributed the disparity in pricing to high financing costs and exorbitant land prices, which have soared more than five-fold in the past decade but they also admit that your average home in Nairobi is overpriced considering the country’s income levels.
“Homes are very expensive in this market when compared with the average income levels,” says Nathan Luesby, a Nairobi-based property dealer.
Official estimates place the average monthly income for workers in the country’s formal sector at Sh35,000 amonth, less than a third of the lowest entry point into the formal mortgage market.
Always happy to see change for the better. :)