@All why is no one talking about the cost of building versus price of the units? The way I see it, as long as the units are not overpriced, there can be no bubble. The availability of easy credit over the last 5-8 years esp for mortgage financing is the cause of the rapid growth in this sector. As an investment, avenue with the decline of stocks and their association with the global recession it remains a better avenue so far.

@Nyquist:True dat, very few nairobians can pay rents above Ksh 50,000.most houses with these levels of rent always mention a servants quarter -Not for your domestic help. but to reduce your effective rent.

@all: Land is an extremely controversial and emotional issue.No more of the stuff is being made.Most peoples entire net worth is in their house/land.However, it is possible to pay too much for property and fail to generate a sufficient return.Thats what has/is happening in some parts of Nairobi and Mombasa.

@Rahatupu: 5 years ago an Acre in karen was Ksh 5-6 million, so was a 3 br apartment in Kileleshwa.Today an acre in Karen is Ksh 15-20mn. The apartment is Ksh 7-9 million.Wouldnt you have been better off renting and buying the acre?.If you bought a townhouse apartment at Ksh 15 million today, how likely is it to be Ksh 30 million in 5 years and will rent rise from Ksh 80,000-Ksh 90,000 now to Ksh 160,000-Ksh 200,000 then? I dont think so?
IF U BUY right priced property you make a kill overpay and poverty will stalk you e.g. CASH poor ASSET rich

@Intelligentsia:The scenario played out in Kile in the past two years.

@FundamentAli: You are right about buyer preferences.The same prefs are now playing across entire locations.Just look at the valuation differences between Valley Arcade,Ngong road-junction and Lavi-proper for the same units.

@all:I could pull some real life examples of nbi property that was overpaid and prices stagnated for a couple of years.

Good people,

I think that there is no property bubble in this market as such. I find it a play of effective demand and supply. Let us recognise that for a long time housing was NOT affordable to ordinary Kenyans due to the laws that existed. The creation of the law that enabled owning of flats was very welcome.This coupled with the availability of funding from banks drove up demand. However, when the banks slowed down lending, the effective demand declined. Well unfortunately, alot of the young people ( 25-40yrs) in this country are the most indulgent in conspicous spending. It is normal that when some new product hits the market, especially in Kenya, the marketers advise for the strategy to reap most returns first. Housing is no different. The prices will rationalise but I can assure you not to wait for a burst! We are nowhere there.

@ Nyquist ;There is no way an average mwananchi making an average salary of Ksh100,000'
I don't think the average mwananchi earns this much in Kenya. Probably about 20K max. And these houses are not meant for that market.


Sorry guys, I just thought we needed some reality check. You will be shocked to learn that most of the houses in these markets are bought 'cash' as 3rd,4th and even 8th houses!
Of all the houses you saw vacant, how many have been repossesed for lack of payment? very few. These guys were not investing for today such that they need the rental money to repay the mortgage. Banks demand that you can afford to repay the house even without rental income unless it is a flat construction loan which the rental income must far exceed the loan repayments and minimal rent.

I see articles especilly in the Standard proclaiming the burst. Can the editors, do proper research first? You do not shout down prices!Only effective demand does.

I see the next front of opportunity in housing coming from the enactment of the law that changes the buidling materials and this will bring down prices but not in Kilimani, Kileleshwa etc.

pizza - the upper class market can be represented as this...in 2005 there was 1 small pizza being distributed to about 10 people... knowing there were 8 slices on the pizza some people were ready to grab a slice at the counter before it reached the table... in 2010 the pizza is bigger (medium size) it is also more pricey per slice and some people are willing to let the others pay for that today and wait for a 'friday' (for the all you can eat promotion)...
the problem occurs when 6, 7 or 8 people are left to share the pizza with 8 slices... hence in some locations a property may fail to completely sell out... but the all you can eat promotion will never occur (read - bubble).. a bubble occurs where there are 3 large pizza and about 8 people to eat... some people take more slices of pizza than they can eat... hold it hoping someone else is going to pay more to have their slice... then the pizza shop guy comes asking for his money...

- most kenyans however need chapati... low cost... available everywhere... you do not have to share... you only share when you are very young (one of the things i do not understand about 'potential' property buyers is the assumption that a house should be cheap.. if you are going to live in a house for about 10 years... why would you want to be able to pay for it in a day???) chapati is convenient and available in many places and its cost varies according to where it is served to you e.g. aroma restuarant (mavoko), k'osewe (south-c), kula korner (kilimani)... in the chapati market you can eat 2 or 3 before you have had your fill...
this post is also confusing me... i will try elaborate later...

advisory.. the following statement may be demeaning to some parties...

the discussion about a property bubble is mundane and should only be left to persons reading western media without understanding underlying concepts and principles...

show me examples of property bubbles in the third world say brazil or india and i will finally ascribe to the half-chance it will occur in Kenya before vision 2030 achieves fulfilment