Makes a lot of economic sense to me....@Wendz

100M for a 1/4 acre and 150M for a 1/2 acre in the leafy surbubs,can they justify these prices?I have recently noticed whole apartment blocks going for months on end without having watejaz..all in the name of being sold ama 90K/Month rent

I echo your sentiments on the need to weed out the developers who have no clue about what they are doing. I personally believe they are responsible for the market speculations which has caused the current sky-high property prices. In other news... we have a client with land looking for a developer to partner with to put up a property along ngong road. email me on lkaptich@propertyzote.com for more details.

Guys guys, hold up,

I still do not get the reasoning for a bubble burst in a city where 40% of property is bought cash!!!! A price correction , yes but very slight. Ile kitu iko is that rentals may come down once infrastructure is done such that I may prefer to move from Kileleshwa to Thika Rd ( also remember that rentals on Thika rd will also go up)so the differential may not be worth it. The guys who will be unable to service their mortgages will gladly sell the properties and make something from it. It is not like you wil have 10,000 units being sold at once.

The main cause of a property burst is borrowers losing income such that they cannot afford to pay mortgages. This hapepned on a large scale in the 1990s due to the SAPs and alot of properties were sold off but was there a bubble burst even with the very small middle class that existed then? Guys let us speak with facts not feelings like modern day journalists. Most residential houses (Syokimau, Kitengela,Katani etc) are not being put up by mortgages but by loans from SACCOs, Unsecured etc, so the lenders have really no way of directly linking this to the properties.

@Evolve - the theory of value adjustment and time value of money is well understood.

I love to challenge the mind. Hypothesis - I take the 4.5 and invest in a business today - exposure to risk much like housing is exposed to the imminent collapse. I double the capital in 3 years and pay myself a decent salary while investing more in the bizna. I rent a hse - max 20K (hata kama ni utawala ama ruai. 15 years later, with all factors considered, will I be able to buy the same house in cash at whatever it's value will be? Will the business still be there? So - the mortgage guy has had this heavy burden and has not been able to set up or grow his/her biz as much. Which is the better option? Of course rent went up also in the same duration...

Remember guys, I am just raising dust here - let's hear ur thoughts.

I hear you... but look at it this way.... in 2009, i invested in a property at 1.6m. Right now, the value is double that. In the same year, another lady bought her house at 4m (same area). Last month, she was offering me her house at 4.2m after making some improvements like putting up a tank, doing the drive way etc and to use her words "halafu utaona ni nini unaweza kuniongeza juu kwasababu ya hii developments"... as in, i was at liberty to say "i am paying 4.2m period"..... my point is, the appreciation of these two properties vs the capital injection is very different. Actually, i would go for an empty piece of land anytime than a house...... It will fetch me much better returns in the end.

For a house, i would go to building my own without credit if possible...... (in some economies, this would be absurd but in kenya, i think its much better)..... by the time i am done building, the house value doubles....

Watched JM yesterday on money matters and i realised that they already have a strategy to infiltrate the mortgage market. These guys have created an axis of HFCK (the mortgage provider), Equity bank (the fundraiser) & Britak (the developer). Looking in closely Equity is a majority shareholder of HF while JM & Peter Munga(read equity) are large shareholders at Britak. According to Britak's MD the IPO is not for cashing out but rather to develop & grow their businesses & that they are looking at growing their 'real estate development business.' With this new axis, a burst is imminent.

@Papa,

The property may actually be very well priced. You see, it is not the house that is for sale but the potential of what you can make of it. If you buy the property ( i.e land in location) what can you do with it? if you put up a six storey flat with shops in the ground floor, you should recoup your money in the next seven years max. So it depends on how you look at it but it is definetely not a place to buy and live in.

@stocksguru7 stop hating on capitalism... As long as demand for housing continues to rise and there is limited supply prices will go even higher than they are now...

We will be all paying 120k installments and 60k rent for those apartments your talking about and hamtasema chochote...

Clearly there is a lot of misinformation on this topic. I totally agree that the price of property is ridiculous but I disagree there is a bubble.
The factors driving up the prices of property are many. Urbanization is the main contributing factor. With every one moving to towns the need for housing grows with the population increase. The growth of towns is not linear and housing can only grow in a linear fashion which is way below the population growth.
Youth bulge falls under the urbanization umbrella and they require housing and amenities. The youth bulge also come with able bodies persons who can contribute labour and brains to grow the economies that will support their consumerism mentality.

Kenya is currently in a situation where demand is high, a youth bulge that might finally create a significant middle class and is able (maybe not capable) to generate wealth. This is only the growth spurt.
Is there a correction in the offing. Maybe but the correction is small and might only happen in the executive range apartment houses(>10 milli) and poorly serviced and highly priced area. Middle class and low income housing WILL NOT HAVE A CORRECTION!

There are too many opportunities in the property sector and if Nairobi is too rich for you look at other towns because this is happening in Nairobi and all other towns albeit in a smaller scale.

buying for renting gives pathetic rental yeild....however buying for capital gains of middle level housing with rents helping manage the mortgage payments still make economic / cashflow sense...