Official data show that City Hall approvals for new building plans last year rose by Sh72.2 billion from Sh242 billion in 2015.
Property analysts say the steady rise in rents in Nairobi is behind investors putting money in real estate as they diverse their assets classes.
Property market analysts say the rising rent and home prices that has gripped Nairobi will continue to hold further underlining real estate as an asset class of premium returns.
Approvals for new office blocks and homes in Nairobi grew nearly a third to Sh314.2 billion last year as rising rents drove investors to real estate.
Official data show that City Hall approvals for new building plans last year rose by Sh72.2 billion from Sh242 billion in 2015—making it one of the fastest growths in recent years. This represented a growth of 29.7 per cent compared to a growth of 6.6 per cent in 2015.
Residential buildings account for 60 per cent of the total plans approved at Sh186.5 billion with the remaining share (Sh127.7 billion) for commercial space, data from Kenya National Bureau of Statistics (KNBS) shows.
Property analysts say the steady rise in rents in Nairobi is behind investors putting money in real estate as they diverse their assets classes.
“Rental value continues to be on upward trend, though we have in the past witnessed occasional fluctuations,” said Ben Woodhams, managing director of property firm Knight Frank, adding that investors are seeing real estate as a safer bet compared to the stock market.
He reckoned that office space rent has increased to $12-$14 per square metre from $5-$6 in 2005, representing a more than double growth over the decade.
Home rents have nearly doubled while property prices have raced by a higher margin over the period, attracting high net worth investors like pension schemes and insurance firms.
Rapid urbanisation, population growth and expansion of the middle class remain the main drivers of Nairobi’s property market that is riding on nearly three decades of under investment in mid tier segment of housing.
Property market analysts say the rising rent and home prices that has gripped Nairobi will continue to hold further underlining real estate as an asset class of premium returns relative to bonds, bank deposits and Nairobi Stock Exchange—where investors have been losing money over the past three years.
The World Bank early this month ranked Dar es Salaam’s real estate ahead of Nairobi. It estimates the economic value of Dar’s real estate at Sh1.2 trillion ($12 billion) ahead of Nairobi’s Sh927 billion ($9 billion) — a Sh273 billion gap.
The bank said Dar’s standing is helped by the fact that it has a higher proportion of housing stock built with permanent materials than Nairobi.
“Only 61 per cent homes in Nairobi have outer walls with permanent materials (stone, brick, concrete block), compared with over 75 per cent in Dar,” the bank’s survey found.
The report highlights an acute shortage of decent residential buildings in Nairobi, adding to a growing chorus on Kenya’s housing deficit of about 200,000 units yearly.
Mr Woodhams said property markets in Dar and Nairobi tell of different stories since the majority of new buildings in Tanzania are government-funded while Kenya’s is private sector-driven. .
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