Rental markets for real estate in Kenya
The urban housing sector in Kenya is ironic: while it offers tremendous investment opportunities given the growing housing deficit of more than 150,000 housing units per year, it has lacked the necessary movement of the supply curve, leading to rise to high-priced properties that are expensive to buy. buy or rent for many, but a few. This has culminated in the multiplication of inadequate housing units, such as shantytowns and slums, and irregular and incremental rental charges by landlords.
Rental markets in Kenya are distinctly different for urban and rural Kenya, as a large number of people move to urban areas where the main markets, industries, institutions and businesses are located.
Current Rent – Market Trend
Availability of rental properties
In rural Kenya, residential and commercial rental properties are readily available and affordable. 82% of the people who live here are homeowners.
Residential rental property attracts relatively low returns with one bedroom houses renting for as low as Ksh3500 – 5500
Commercial rental properties have better returns compared to residential
UrbanKenya it is totally different, with people having to fight for the few available commercial and residential rental properties.
Rental properties within the CBD are hard to come by and when you are lucky enough to get a vacant space you part with a significant amount of money not only to rent the property but also to offset other competitive offers made for the same space.
Offices located outside of the CBD and in the suburbs are generating high returns as industries and organizations seek to not only reduce rental expenses, but also deal with the parking difficulties and traffic congestion that figure prominently in the CBD.
The middle class increasingly lives on the outskirts of the city in search of affordable and comfortable residential rental properties.
Due to the lack of available and affordable space in the CBD, property owners within this area are making huge profits by dividing available commercial space into sixty-square-foot stalls leased at competitive prices by small-scale merchants such as boutiques.
The lack of well-located land in major cities such as Nairobi has pushed real estate development along major highways, such as the Mombasa highway, where land for development is affordable and available.
Worrying trend?
There is a growing trend among Kenya’s upper class that may be cause for concern. In a bid to increase the supply of housing units and minimize the costs associated with single-family residential properties, Kenya’s upper class are moving into modern, luxurious but cheaper flats and apartments, which have mushroomed in upscale neighborhoods. . The downside is that middle class home prices have risen considerably beyond the means of people who are legitimately middle class.
Type of tenure
Periodic tenancy is the main form of tenancy in Kenya, where tenants lease rental properties on a monthly and yearly basis until either party terminates the tenancy by notice.
Tenants in Kenya can be classified into the following types who pay a range of rent:
Low-income: often the urban poor who rent in slums and slums and pay as little as Ksh500 for single rooms
Lower-middle income: Ksh6,000 – 40,000 for 1BR houses
Upper-middle income: Ksh50,000 – 250,000
High income: rent in exclusive neighborhoods and can spend from Ksh300,000
rental income
Commercial rental properties show the highest returns in urban Kenya, where the real estate market is growing at 20% a year.
By 2011, the luxury real estate market in Kenya recorded the highest price increase in the entire world
Properties in specific urban areas are seeing a 50% increase in rental prices
Kenya’s elite are the most favored by the burgeoning real estate market as they are the only ones with the kind of money needed to buy the expensive properties, develop and rent them and enjoy the return on their investments.
Rental yields in major cities like Mombasa and Nairobi are approximately 6-7% per annum with 3-bedroom houses attracting rental yields of 5.72% per annum.