For over a year now, housing indices have been reporting a stagnation in prices for high end homes. At the same time prime rental yields have also dropped slightly. This, put together, with government policy moves promise to shift the focus to lower priced homes, offering those who want to buy homes but can hardly afford to due to the prevailing high prices and shortage of home sin the lower income brackets a lifeline. A Global Property Guide report released this year indicated that Nairobi is ranked among the most expensive cities in the world and the property market has experienced the highest number of costly houses ever in the last seven years. House prices and rents are also skyrocketing, making it hard for the low income earners to own and rent desired homes. “Using the ratio/rent, that is years of rent that would be required to buy a property, it would take up to 14 years to own a 300-square metre apartment in Nairobi’s up-market residential areas,” said the Global Property Guide report. It noted that the number of people who own homes in the cities is 18 per cent, on average. However, majority of the low income earners do not own homes owing to the few developers ready to finance projects in that segment. In July this year, the Knight Frank Prime Global Rental Index showed a mixture of rising supply and falling demand, which resulted in a decline in prime residential rents in the first three months of the year. At the time, Charles Macharia, Senior Research Analyst at Knight Frank Kenya, said: “Demand for prime rental properties has traditionally been from expats. Rents have trended lower as we are seeing weakened demand from this segment of the market due to multinational firms downsizing as a result of adverse economic circumstances driven by low commodity prices.”
This also followed a trend identified by the Hass property Index in January that showed a decline in rental prices. The Hass Property Index for the first quarter of 2016 said the average price for one to three-bedroom apartments in Nairobi’s leafy suburbs was Sh11.8 million. On the other hand, the average price for four to six-bedroom property was Sh36.5 million, thus largely alienating the lower income earners. Market slowdown This was in line with recent projections that has seen a slowdown in the prime market with some analysts saying developer-focus on this market segment was causing an oversupply. This would then, hopefully result in two scenarios. one a market correction that would see home being more reasonably priced and a change of focus by developers to lower priced homes targeting the lower income brackets. Fast forward to last month and two things happened that brought focus back to the question of helping Kenyans own homes. This time from the government. First, local firm Suraya Property Group signed a deal with the China-Africa development Fund, a Chinese construction firm and the government to construct 20,000 homes for government employees.
This also a move seen as a possible pressure valve that could ease up home prices for projects open to the general public. At the same time, it was reported that the The Finance Act, 2016 raised the portion of mortgage repayments that will be tax-free from Sh12,500 to Sh25,000. This relief would also be available to those who took loans, other than mortgage, to buy or refurbish their homes. The trend pointed to a concerted effort to enable more Kenyans own homes in a real estate market where the growth has been witnessed mainly in the high-end segment, with developers giving low cost housing a wide berth. Developers too are also beginning to focus more on the lower income segments with projects geared specifically to first home owners. One of these is Gakuyo Real Estate. “We felt we could not neglect the lower income earners. We have the tools to help them through land banking, which protects us from land price shocks, and offer them cheap financing models,” Kariuki Musa, the CEO of Gakuyo Real Estate. Gakuyo is putting up low cost housing projects targeting the lower middle income group in Nairobi, Kiambu, Kajiado and Mombasa. The bonus? Buyers don’t have to go through the hassle of raising a deposit, thanks to Gakuyo Zero Deposit Programme. The firm is financing 6,000 housing units valued at Sh9 billion. Construction for all the units will be complete in two-and-half years. Musa said the most expensive bungalow on an eighth of an acre will go for Sh1.5 million. The monthly payments, he said, are equivalent to the rent the buyers have been paying. Read more at: