Soaring House Prices Squeeze Middle-Class Homebuyers in Kenya
Lower-class neighborhoods like Kitengela, Syokimau, and Mlolongo also experienced a notable increase in average prices, rising by 34.3 percent to Ksh10.97 million from Ksh8.17 million in 2021.
JB Muiruri
Rising house prices are placing significant pressure on middle-class homebuyers in Kenya. Since 2021, the cost of purchasing a home in middle-class neighborhoods like Buru Buru, South B, or South C has surged at a faster rate compared to high-end areas such as Karen, Nyali, or the Milimani zones in Nakuru or Kisumu.
Data from the Kenya Bankers Association (KBA) reveals that the average home purchase price in middle-class estates skyrocketed by 78.5 percent to Ksh17.58 million in 2022 from Ksh9.85 million in 2021. This surge is making it increasingly challenging for the working class to afford homes, particularly for those relying on bank financing, as lending rates remain high due to efforts by the Central Bank of Kenya to curb inflation.
Lower-class neighborhoods like Kitengela, Syokimau, and Mlolongo also experienced a notable increase in average prices, rising by 34.3 percent to Ksh10.97 million from Ksh8.17 million in 2021. Conversely, upscale market areas saw a slight uptick in prices, from Ksh20.95 million to Ksh21.25 million, a 1.4% increase. Supply and demand dynamics, alongside general economic development, are cited as key factors driving these trends, according to KBA data.
This trend underscores the growing investment appeal for real estate developers in the lower market segments, amidst persistent inflation and stringent economic policies dampening returns across various sectors. The last quarter of the year witnessed heightened activity in the low-market segment, comprising 62.26 percent of all house purchases, a notable increase from 47.83 percent in the previous quarter.
Conversely, the mid-market segment experienced a decline in completed transactions, accounting for only 20.75 percent, down from 36.96 percent in the previous quarter. However, there was a slight increase in activity in the high-market segment, rising from 15.2 percent in the third quarter to 17.0 percent in the fourth quarter, as per the KBA survey.
The KBA reported a surge in credit growth in the building and construction sector to 13.04 percent in December 2023, up from 2.74 percent in October 2023, while lending to real estate rose to 6.46 percent in December 2023 from 3.74 percent in October 2023.
Since 2021, the average cost of buying an apartment in mid-level estates rose from Ksh9.8 million to Ksh13 million, while the cost of a bungalow increased from Ksh6.4 million to Ksh14.2 million, and the cost of a maisonette jumped to Ksh18.2 million from Ksh12.1 million in 2021. In the low-market segment, the prices of flats, bungalows, and maisonettes increased from Ksh7.5 million to Ksh11.8 million, Ksh6.8 million to Ksh10.1 million, and Ksh12.5 million to Ksh14.5 million, respectively, on average.
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