Flats dominate property market as leasing now outpaces rentals

An ongoing affordable housing project in Thika is changing the skyline of the industrious town, with three blocks are on their ninth floor with seven more floors remaining for the three and two-bedroom apartments. The Project is located at the heart of Thika town sitting on about a three-acre parcel of land opposite Thika Municipal Stadium, the land was owned by the Ministry of Housing. [File, Standard] Flats and apartments dominated the real estate market between 2023 and 2024, according to a new study by the National Statistician. The study shows that the residential rental market saw flats and apartments dominate the market, comprising 77.1 per cent of rental properties. The Kenya Housing Survey 2023-2024 by the Kenya National Bureau of Statistics (KNBS) indicates that 23.3 per cent of residential properties in the market were three-bedroom flats or apartments. The survey collected current market data on residential and commercial property prices, trends in housing typologies, and housing finance arrangements. "This was followed by two-bedroom flats or apartments at 18.1 per cent and maisonette four and above bedrooms at 12.2 per cent," it said. According to the study, Nairobi, Kiambu and Kajiado counties held the largest share of rental properties. The results indicate that 19.6 per cent of the properties were in the Nairobi middle region, 17.9 per cent in the Nairobi upper middle, 14.7 per cent in the Nairobi lower and 14.6 per cent in the Nairobi upper region. Wide variations Coast counties (Kwale, Lamu and Taita Taveta counties) and Kilifi regions had the least properties at 0.2 per cent, 1.3 per cent and 2.2 per cent, respectively whose prices exhibited wide variations, respectively whose prices exhibited wide variations. The rental market was competitive, with 88.8 per cent of properties on offer for lease having been leased out in 2023. Rental prices varied widely. For instance, the median rent for one-bedroom bungalows was Sh15,000, while four-bedroom bungalows could command rents of up to Sh170,000. Townhouses had the highest rental rates, with two-bedroom units leasing for Sh120,000 per month. The survey also found that rental yields varied by property type, with studio apartments and bedsitters yielding the lowest returns (2.2 per cent), while two-bedroom townhouses offered the highest returns at 8.3 per cent. On commercial properties, office buildings were the most prominent property type, making up over 50 per cent of the market. "Nairobi, Kiambu, Mombasa, and Machakos were the key locations for commercial properties. Office spaces commanded the highest prices at Sh11,000 per square foot, with special-purpose properties and industrial spaces following at lower rates," it added. Despite the strong demand for office spaces, the report says hotel and hospitality properties experienced slower sales. In the commercial rental market, office spaces again dominated the sector, comprising over 60 per cent of rental properties. Rental prices varied depending on property type and location, with special-purpose properties and suites or condominiums attracting the highest rents at Sh150 and Sh140 per square foot, respectively. Industrial properties Industrial and warehousing properties had the lowest rental rates, at Sh40 per square foot. Service charges also varied across property types, with industrial properties incurring the highest charges due to maintenance costs. The survey, however, noted a gap in reliable data regarding housing supply, which hampers effective decision-making and policy formulation. For instance for some years now, the narrative of the country facing a deficit of 200,000 deficit per year against the 50,000 being constructed. Whereas the Consumer Price Index (CPI) captures information on monthly rent, current housing market supply-side data is missing. This is despite the real estate sector being one of the most vibrant in the Kenyan economy and has been registering exponential growth in the recent past as evidenced by its significant contribution to the country's Gross Domestic Product (GDP), which has averaged at 8.9 per cent. The sector's output increased by 33.7 per cent - from Sh946.7 million in 2019 to Sh1.27 billion in 2023. The sector's real output, the report said grew from 6.7 per cent to 7.3 per cent over the same period. The growth in the sector has been supported by infrastructural development such as roads, utility connections, rapid urbanisation, better returns on investment in the sector and several government initiatives towards affordable housing. On amenities, namely parking lots and domestic servant quarter (DSQ), the majority (73.9 per cent) of residential properties had parking lots while 22.7 per cent had a domestic servant quarter (DSQ). In addition, all the two and three-bedroom maisonettes had parking lots while 73.3 per cent of the three-bedroom maisonette had a domestic servant quarter (DSQ). Six in every 10 two-bedroom townhouses did not have a parking lot. The survey results indicate that CCTV cameras were the most common amenity (59.8 per cent) in residential properties, followed by garden backyard or play area at 59.1 per cent and backup generators at 55 per cent. Also, over 600,000 tenants enjoy living in households without paying rent. The report showed that 638,761 households did not pay monthly rent without the landlord's consent. Tenants in Lamu County lead with 19 per cent, followed by Mandera (18.9 per cent) and Nyandarua (12 per cent). Nairobi and Kiambu tenants who enjoy the privilege accounted for 51,507 and 74,782 households respectively. Additionally, 111,089 tenants avoided paying rent without the landlord's consent; potentially risking legal ramifications. Mandera led with 14 per cent, followed by Lamu (nine per cent) and Garissa (6.2 per cent). Nationally, more than half (52.8 per cent) of homeowners acquired their property through one-off construction, while 27.0 per cent were constructed incrementally. In terms of ways of acquiring houses, only 2.5 per cent of the homes were purchased. Took loans The majority financed the projects through cash-savings at 91.4 per cent while 5.5 per cent took loans, 0.2 per cent mortgages and 1.2 per cent received donations from relatives and friends. "Uptake of mortgage was low across the country with less than one per cent of households reporting to have acquired their homes through mortgages," the report read in part. The report indicated that 71.8 per cent of tenants did not have a written lease agreement with their landlords while 28.2 per cent had. The document outlines the lease terms and legally protects the relationship between the tenant and the landlord. The counties of Kajiado (69.4 per cent), Taita Taveta (50.2 per cent), and Nairobi (40.5 per cent) had the highest proportion of tenants with written rent agreements.

Flats dominate property market as leasing now outpaces rentals

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Flats dominate property market as leasing now outpaces rentals

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