Developers have been called out for overpricing homes making them inaccessible for most buyers.
Speaking in Nairobi yesterday Shelter Afrique chief executive Andrew Chimphondah said the majority of developers tend to add higher margins to the units they bring up, which in the long run makes such units rather expensive.
“This partly explains why there is a glut in the property market despite the reported housing shortage in Kenya,” he said.
Chimphondah urged local developers dabbling in low-cost housing to help improve uptake and in turn reduce the oversupply in property that is currently being witnessed in the country.
Real estate developers, in trying to recoup their investments, have passed on the high cost of land, high financing cost, poor infrastructure and lack of utilities to the end-buyers, keeping rental prices exorbitantly high.
Chimphondah said land is very expensive in Kenya, sometimes constituting up to 40 per cent of the cost of the house – “probably the highest in Africa”.
“My advice to local developers is that they would rather chase less profit and more volume because if they chase the profit and not the volume, they end up not having take-ups. They can achieve this by venturing into the affordable housing space,” he said.
The country has witnessed a housing glut build-up over the last three years with many ready developments sitting idle with no takers as a result of declining demand occasioned by lack of affordability.
While some landlords are heeding to market pressures and using tactics such as reducing rent, most potential homeowners are now opting to settle in remote parts of Nairobi and satellite towns for cheaper units.
The Hass Property Index released last week for the July-September period shows newly finished modern units are being taken up at a much faster pace as opposed to costlier units within the city centre.
This led to a paradigm shift as Thika, Limuru, Mlolongo, Tigoni, Ongata Rongai, Kitengela and Ruaka reported the highest jump in asking prices for rent over the review period.
“Many tenants are now preferring affordable units as they take caution to save in the wake of job losses across all sectors,” HassConsult head of research and marketing Sakina Hassanali said.
According to Hassanali, the price stagnation on both rental prices, house sales and land prices have also been affected by lack of liquidity from constrained budgets coupled with interest rate caps.
“Within the industry, there was discounting on closing prices and land being offered by banks and much distressing sales. However prices to hold on the advertised price,” she added.
