@TB thanks for this post,insightful it is.

@ stocksmaster your 2nd point is spot on.

I wanted to share something I read in an article by a guy in one of these real estate management companies,it was in a recent edition of Home & Away pullout in the Thursday Standard. He was doing a similar analysis of the reasons why the Nairobi property market behaves thus. He talked about the way diaspora remittances was one of the factors that caused prices to rise significantly and continues to do so even with the current global credit crunch. This is on the basis of currency conversion. He gave an example of a Kenyan in the US spending 145,000 USD to buy a property here when the KES was 62 bob to the USD,comes to around KES 8M. Fast forward to now - same property has appreciated to KES 11M,same Kenyan in the US spends the same 145,000 USD at the current rates of KES 78 to the USD. The argument was basically that the factors are broad and intertwining. While @tonystark is right to observe that diaspora are negatively affacted by the global crunch,the currency conversion puts them in the same situation as 2 - 3 years ago. I found that interesting.

That said,I totally agree that property development on the outskirts of Nairobi,while it may not look very profitable for developers right now,will be all the rave very soon as infrastructure development gets underway. I have a friend who stays in a 2 b-room apartment opp. Windsor for 17,500/-. I can bet that by the time they complete the 5 lanes on Thika road,the same might be going for 25-30k,as it should when you see the size of the rooms. It's depressing staying in a small 1 bedroom for about the same rent simply coz one cannot stand the hustle of traffic on Thika road! Infrastructure development I believe will play a key role in opening up the outskirts,even the yuppies are prepared to go and live in Kitengela in the next 2 - 3 years in it will take 20 - 30 min to fika town. And owning a 3 b- room crib for 3M - 5M in such a place at that time will be ok for most guys - I wouldn't mind. Any developer here to give their views?

smano

@Fantony,you missed the point by a mile. Do not look at the write-up as an individual problem,look at it as a societal problem,ever heard of micro & Macro issues. They go hand in hand.

1. 16% mortgage expensive????... it's naive to think like that. i just think the writer has never borrowed a facility inside Kenyan borders.

16% is high,ever thought of what the rates are in most developed countries in the world? check the rates for Japan,SA,UK,US etc,then tell us if you are happy to pay the kenyan rates.


2. Majority of nairobi residents can't afford housing; so what..? As a developer you are a businessman first and there is a huge difference between a need and a want,the latter group can afford?

Case in point; at one point mobile phones were sold for 200K and people were charged to receive calls,enter MJ and now housegals own mobile phones and the businessman Safaricom is making mad cash.


3. Whining will not help. ohh...its so expensive...ohhh.... drugieeeesss and foreigners are driving prices up. Are all those in Lavington,Kyuna,Spring Valley,Thigiri,Gigiri,Nyari,Kitisuru,Loresho,Muthaiga are druglords and somali refugees?

Nobody is whinging,we just want the central and local governments to provide some order,its their job. Most countries restrict the activities of non citizens,e.g TZ and the current EAC impasse.

Wake up and smell the coffee! Hard work pays... with a house in a high class neighbourhood,and that when you are over forty; not when you are at your entry level job.
Drop you village standards? Make a decision to what lifestyle you want to lead.
And have a critical look at those who have made it!
Peter Kenneth on Churchill Live described an accurate arc they followed...started at eastlands,then nairobi west/southb/c/langata and finally to the nice list above.
Stop whining for heaven's sake you are making sk appear a losers paradise.

I would like to see you tell a watchman who works 12 hours everyday that hardwork pays so he should keep his eye on the 12m mortgage. Though smart and hard work does pay. There are very many kenyans who work hard e.g Teachers etc. they cannot buy houses in the competitive Nairobi mortgage but I know for a fact that there is an estate in Nakuru called Teachers with very decent houses and was constructed through teachers sacco loan schemes. Its not all about the amount of money,some smarts and collective organisation in society also helps.



4. stop viewing your world with your special brand of lenses! which prices fell? where?

Whats wrong with looking for discounts,its called smart shopping.


I guess if you can't win with facts,you can always pen bile-laced,xenophobic rants to distract everyone.

From a developer's point of view,I being one of them,though in a small way,all one is interested in is highest returns within the shortest time possible. This explains the reason why in the past,the higher middle class market (6-10M) houses have been a hit in the past,coz there was hype sorrounding the specific locations where such houses could be developed,Kilimani,Lavi and the like. However,this is the segment of the market that has been really affected by the economic downturn.

Developers have not been very keen on the lower end of the market until recently coz it is now obvious that this is the segment that the demand is sustainable in the foreseeable future. It is thus clear that estates are being set up in the outskirts of Nairobi where the demand is sure,though the returns may be relatively lower.

Another important factor to note is that the prices of land in the neighbourhood determines the price of the houses done. Thus a similar house in Kitengela,Ngon'g,Kiambu road and other locations are priced with amazing disparities.

We also have to differentiate demand and effective demand. Demand is quite high but not all those who wish to own houses can afford them. It is thus important to note that effective demand constituted by those who want houses and go for them is what is very important from a developer's point of view. Majority of Kenyans who buy houses through mortgage cannot afford houses beyond the 8-10M price largely due to the very high repayments which are beyond reach for most of them.

..wise as a serpent,humble as a dove

Good people,

My take is that the prices in Nbi may hold for a while longer. These are my reasons


Nairobi was designed as a class capital. There should be a place for everyone.( sadly) The owners of housing in Nbi are the owners of capital in Kenya. They will ensure that Nbi remains as is.e.g when commoners tried to owm land in Karen,they slapped a minimum 5acre per entry that was way above the commoners. What amazed me was that they allowed the dezoning of some areas like Kilimani but the result is there for all to see.. chaos! The beauty of the place is lost and now remains a concrete jungle. I think they will block this through Kisia.
Real estate in nairobi is a not a common good ( in economics) but has grown to become a luxury item. This will be more felt when the EAC comes into play. As you well know,luxury items respond differently to higher prices.
Now onto the outskirts that are being seen as the saviour,it is unfortunate that there is no planning and so what we end up having are concrete slums. e.g Thika road towards ( githurai 44 and 45) is horrible,Mwiki,Huruma,Ruai,Onagata Rongai,Ngong' etc. The only place that could be slavagabe is Msa Rd. This is because along Msa Rd ( upto Mlolongo) there are alot of companies moving there and building premises. These companies,new infratstructure,coupled with Upper hIll area offices will ensure a balanced area where definitley prices will continue to climb. It means that people will live around here and work around this area.

The only other best option would be to develop a new city. But even then,Nairobi will hold its forte.

@TB,

Very good.This is the reality on the ground.

I once had a plot (with intention of bulding)at Ongata Rongai and had hoped the the Langata dual carriageway would end at the Bomas turnoff.This did not happen,then there were vicious gangs killing people there i.e insecurity,no water,no sewer lines(the whole place reeked of sh.t),uncontrolled development.I gave up and sold it.

Now can someone tell me why it is that in Japan they have 100 year mortgages?

Why despite the number of property owners having gone up over the years the government cannot reduce stamp duty from the current 4 per cent?

Why can't the government reduce construction costs by removing VAT on hardware materials?

I also find the land rates paid to NCC in Nairobi quite high

Another problem is that when you apply for a refund from KRA for mortgage interest payment in the tax returns,they don't pay up!