In Summary
  • Affordable housing is not going to change the fact that the current property market, the one that attracted billions of dollars is going down.
  • Low cost housing project does not make economic sense to investors because of limited margin for profits.
  • "It does not require for someone to be an expert analyst in order to understand that real estate market in Kenya cannot be sustained at current levels of pricing," Kioleoglou Kosta.
  • It is important to stay up to date, follow up with the market developments as well as the local and international trends.

Over the last decade, many Kenyans took their lifetime savings and invested in the real estate market. Whether through chamas or saccos, this move was due to the attractive promise of a safe and secure opportunity, even guaranteed in some cases, that the property market had to offer.

Unfortunately, same as the Kenyan stock market which was promising the same and then collapsed, the real estate dream was hiding the same risks and dangers for those who irrationally jumped into this market, making investments without considering the risks, sustainability and capacity of the market.

Over the last three years, a feeling that something might be going wrong with the real estate investments is slowly growing, although a big majority continue to live in denial.

Every market analyst notes that economic headwinds in 2017 adversely impacted several sectors of the economy.

The country’s macroeconomic and microeconomic status was seriously affected negatively. The political instability which the country faced during the last elections triggered a sequence of negative events which existed before elections but were kept carefully under the radar in an effort to manipulate the real market dynamics and economic performance of the country.


Long before the pre-election period, there were several signs that the Kenyan economy and its real estate sector were moving on sandy grounds.

The Kenyan shilling was under huge pressure and lost over 20 per cent of its value against all major currencies. It is important to note that the currency never managed to recover the majority of these losses.

The currency, seriously weaker, for the last three years in a ranging lower levels is affecting not only the country’s macroeconomic indexes but day to day life too of every resident.

Another important fact is that the country’s external debt has been growing with a geometric progression, same as the private debt.

So, is real estate market in Kenya sustainable or is it going to follow the example of the stock market- lose most of its value, causing the evaporation of huge wealth which has been invested mainly by the poor and middle class of Kenya during the last decade?

First, I would like to clarify that a real estate boom was a natural development for a country like Kenya. As the size and dynamics of Kenya’s emerging economy were getting bigger, better and stronger, the need for more and better housing, improved infrastructure and the expansion of urban areas, especially in the capital city of Nairobi was a must.

The problem was that in the middle of this fast growing country’s prosperity and the dizziness of the temporary welfare, people forgot to use common sense and started operating irrationally.

Kenya and her citizens started to live and spend beyond their real means- buying expensive cars, luxury houses and focusing on a lifestyle which could not be sustained.

There is a saying, ‘rich people first make the money, then they save money and only after that they start spending it. Poor people on the other hand first spend and then think about making or saving the money.’

This is exactly what happened to the real estate market of Kenya. Thrilled by the huge need for housing in the country, majority of people rushed to invest heavily, directly or indirectly in the promising sector forgetting about the basics of real estate and general investment rule of risk-return factor and market analysis.


The housing deficit of over 200,000 houses a year is real. Same as the need for commercial space. There was, and actually there is still a huge demand for properties in this country.

The question is: what is the need, what type of properties and at what is the real average affordability in the country.

I wrote about this almost five years ago, stating that this market does not need luxury properties but affordable housing. Today, after almost three years of market stagnancy, everybody talks about affordable housing.

But we need to make this clear. Affordable housing is not going to change the fact that the current property market, the one that attracted billions of dollars is going down.

People have to be prepared to face losses. The sooner investors realise this, the better for the market. If investors do not face the reality now and fail to make the required correction moves, then panic and a possible irrational sale-offs could push the market to a collapsing point.

A quick outlook of the sector’s performance is really disappointing. For the last 18 months, there was a general belief that the only reason the real estate market was slowing down was the election period and the wait and see attitude of buyers and investors.

Nine months since the ‘hand shake’, which officially marked the end of the election period, reality is presenting a different version of the story despite the efforts of those who like to manipulate the market and try to cover the real face of Kenya’s property market.


It does not require for someone to be an expert analyst in order to understand that real estate market in Kenya cannot be sustainable at current levels of pricing.

The types of properties that developers and investors had preferred to invest over the last ten years were targeting the wrong group, representing only a small fraction of the current huge housing demand of the country.

The biggest part of the current demand includes Kenya’s middle and lower class with low affordability. Any expectations for a quick market recovery and the continuation of the boom period after the elections are now fading out.

Available reports show that the market is slowing down after a small rebound during the first quarter of 2018, which was not as strong as initially expected.

There are chances that we are heading to a recession rather than further market growth or another real estate boom period.

This argument is based on the available market data and reports. According to the latest house price index report released in September 2018 from the Kenya Banker’s Association, there was a 1.76 per cent overall increase in house prices during the second quarter of 2018.

This represents a marginal decline from the previous quarter’s 2.08 per cent increase, reflecting a sense of price stabilisation and therefore non-sustenance of the surge seen in the first quarter.

The recovery recorded in the quarter of 2018 came in the wake of strained market conditions after a series of lower rate in price growth for five consecutive quarters from the fourth quarter of 2016.


This dismal trend was attributed to various factors, including shrinking private sector credit growth and market anxiety as well as political instability that preceded the 2017 General Election.

The KBA-HPI indicates that the increase should be considered in the context of being a reprieve, because the rise could be associated with transactions from previous quarters that were put on hold due to market anxiety and lower lending risk appetite following the enactment of the Banking (Amendment) Act 2016.

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