Two-bedroom flats tenants hit hard in sharp urban rent rise

Tenants of two-bedroom flats have experienced the fastest rise in rent over the past five years with renting costs of three-bedroom maisonette rising at the slowest pace.

Official data puts the average monthly rent of a two-bedroom flat at Sh20,012 in March up from Sh15,982 in the same month of 2012, reflecting a growth of 25.2 per cent.

The flats are popular with middle class homes as the rents fit within their monthly budget.

Three-bedroom maisonettes, preferred by rich tenants, are up by 14.6 per cent to Sh32,797 over the same period, according to the Kenya National Bureau of Statistics (KNBS), while a two-bedroom bungalow is up 15.3 per cent to Sh27,759.

This means developers of two-bedroom units have gained the most in terms of rate of returns on their investments, especially in major towns.
KNBS senior statistician Simon Gaitho said the bureau does not currently track the rent for one-bedroom houses.

Sector analysts attributed the faster growth in two-bedroom rental prices to rising demand among working middle-income households. Such properties whose location is near or along routes connecting to commercial towns have proved convenient in daily commute.

Maisonettes are often located in places farther from town centres and are preferred by the rich while most middle-income commuters opt for two-bedroom units whose lower costs match their budgets, according to Anthony Mugo, chief executive of Falcon Development— a real estate developer.

READ: Two-bedroom house tenants feel 7.5pc rent rise pinch

Rents in the cities — Nairobi, Mombasa and Kisumu — are generally higher due to higher demand and cost of living.

Middle class homes spend the bulk of their monthly income (23.6 per cent) on housing, utilities and cooking gas, exposing them most to the rising costs.

Landlords are now required to pay 12 per cent of gross rental income in taxes compared to the previous 30 per cent of their profits in what analysts say could see property owners raise further rent to protect their margins.

Taxing gross rental income means landlords will not deduct costs incurred on wages, repairs, utilities and land rates.

The Kenya Revenue Authority will not distinguish between profitable and loss-making property holdings in charging the tax.

Low-income earners focused housing developer Karibu Homes managing director Ravi Kohli earlier said monthly charges for two-bedroom flats match the income budgets of most middle income earners, hence the preference.

Mr Kohli reckoned there is a glut in the high-end homes market, including three-bedroom units, citing Nairobi’s Kilimani and Kileleshwa estates where several units have been unoccupied for months.

Rent for one-room houses, popular with low income earners, are up 17.8 per cent to Sh3,676, official data shows.