Middle class home prices rally 78pc in three years

South C houses

Houses under construction in South C, Nairobi in this picture taken on August 30, 2020.

Photo credit: File | Nation Media Group

The cost of acquiring homes in middle class estates such as Buru Buru, South B and South C has increased at faster rate compared to houses in high-end neighbourhoods like Karen, Nyali and Milimani zones in Nakuru and Kisumu since 2021.

Data the Kenya Bankers Association (KBA) indicates that the average cost of buying a house in middle class estate rose 78.5 percent to Sh17.58 million last year, up from Sh9.85 million in 2021, signalling increased hardship by the working class to acquire homes.

For buyers who rely on bank financing, the situation has further been compounded by bloated lending rates put in place by the Central Bank of Kenya to tame inflation.

In low-class neighbourhoods such as Kitengela, Syokimau and Mlolongo, the average price shot up 34.3 percent to hit Sh10.97 million up from Sh8.17 million in 2021, while in high-end market areas it grew by a marginal 1.4 percent to stand at Sh21.25 million up from Sh20.95 million.

According to KBA, the trend points to the intersection between demand and supply dynamics as well as overall economic development.

The drift also points to improved value for investment for real estate developers within the two lower-cadre market segments, coming at a time when protracted inflation and tightened economic policies have subdued investor earnings across multiple sectors.

During the three months to last December, activity within the low-market segment remained dominant and rose to account for 62.26 percent of all house purchases up from 47.83 percent during the preceding quarter.

“Conversely, the mid-market segment saw a significant drop in completed transactions, dropping to account for 20.75 percent from 36.96 percent in the previous quarter. However, the high-market segment (Region 3) registered a marginal rise in activity from 15.2 percent in the third quarter to 17.0 percent in the fourth quarter,” said the KBA in the survey.

“Credit growth in building and construction surged 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 Sh9.8 million to Sh13 million, that of a bungalow from Sh6.4 million to Sh14.2 million while that of a maisonette jumped to Sh18.2 million up from Sh12.1 in 2021.

In the low-market segment, the prices of flats, bungalows and maisonettes shifted from Sh7.5 million to Sh11.8 million, Sh6.8 million to Sh10.1 million and Sh12.5 million to Sh14.5 million, respectively on average.

PAYE Tax Calculator

Note: The results are not exact but very close to the actual.