Exciting news in the real estate sector! Recent data from the Hass Consult property index reveals a remarkable transformation in housing preferences. Over the past two decades, there has been a significant shift from detached housing to semi-detached housing and apartment-based developments. Detached housing has experienced a sharp decline of over 45%, plummeting from 28% in 2016 to a mere 7.5% in 2023. Meanwhile, apartments have claimed the lion’s share with 64% of the market, while semi-detached housing has seen an impressive growth of 28% since 2016. Let’s delve into the factors driving this exciting change:
(i) Rising Construction Costs: The surge in fuel prices has caused construction costs to rise by 7%. In light of this, the burgeoning middle class and first-time buyers are seeking more affordable investment opportunities in the real estate sector, leading to a shift towards semi-detached and apartment options.
(ii) Land Use and Zoning Regulations: Construction trends have been shaped by changes in land use and zoning regulations. Areas like Lower Kabete and General Mathenge now allow developments of up to 10 floors, compared to less than 5 floors just five years ago. This has become an attractive proposition for real estate developers, as it presents a great opportunity for profits.
(iii) Shifting Investment Landscape: The decline in performance of bonds, equities, and fixed deposits has prompted investors to seek returns in other industries. Satellite towns have become particularly popular, with rental revenues increasing by up to 9% in the last year. In contrast, suburbs in Nairobi have witnessed a drop of nearly 12% in rental revenue.
Proof in the Numbers!
The statistics speak for themselves. In Langata, known for its semi-detached housing and emerging apartments, sale prices have surged by 17% in the last year, with rental revenue rising by 1.8% during the same period. Similarly, Ongata Rongai is displaying a 13% increase in sale prices and up to 9% growth in rental revenue, signalling a growing investment trend in satellite towns.
The Satellite Town Boom!
Satellite towns, except for Athiriver, are experiencing remarkable growth in rental revenue, with Syokimau leading the pack with a staggering 14% increase in rental prices. Moreover, these areas are witnessing an uptick in sale prices, with Thika Town showing an impressive 3.3% increase. In contrast, suburb areas are witnessing a downtrend in both sale and rental prices. Upperhill, once a thriving suburb, has been hit hard with an 11% drop in both sale and rental prices.
In conclusion, the real estate market is undergoing a fascinating transformation, with detached housing taking a backseat as semi-detached housing and apartments gain momentum. Factors like construction costs, zoning regulations, and shifting investor preferences are driving this trend. Satellite towns have emerged as hotspots for investment, attracting both buyers and tenants alike. As we move forward, it’ll be intriguing to witness how this evolving landscape shapes the future of real estate in Kenya.
Written by Cynthia Kitolo
Legal Officer & Advocate of the High Court of Kenya