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Insightful take on Nairobi Real Estate
Rank: Member Joined: 11/6/2006 Posts: 276
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i do not advocate for anyone to go across town selling apartments for 17 M.
i normally analyse property sale prices using either sale price per sqaure meter or sale price per square foot.(usually using KSh/SM).
so i fathom a 17 M apartment in Westlands to be one of:
- ordinary and recent measuring about 180-210 square meters
- furnished/hence can be used for,recent with lots of amenities from swimming pools to gyms,restaurants measuring 140 square meters
Just so McReggae is safe. Don't pay for any built property if you think it can't fetch between 0.75% - 1% of its sale price as rent per month (that is descendant to some other thing they teach in college called cap rate).
Hence that apt better be able to fetch between KSh. 125,000 to 170,000 as rent.
Is that possible for the two options above????? You tell me.
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Rank: Member Joined: 11/11/2006 Posts: 60
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@TuskerMoto; excellent thread,kudos!
I spent three months studying the NRB & Metro realstate market,this thread would have saved me plenty of legwork ;) ... despite a few ego postings the discussion has been quite insightful.
My take on Kenya realstate -
The housing market has been explosive,and we may be at the TOP (until after 2012 elections) for reasons well articulated on this thread,not because the housing demand has been met,but due to shortage of affordable supply.
For an honest professional couple with two children,the affordable mortgage is 2.5M - 3.5M,such housing is ONLY availlable in the NRB Metro outer areas as variously noted.
So,what happens to mortgages of over 10M ... expect a dramatic increase in foreclosures ...but,these will ONLY be spotty deals here and there,note,at this time banks are very coutious with their mortgage loans ...
Downtown NRB and immediate hoods Living Comfort Index is plummeting,the number of cars in town will double in under three years and going in/out of town is already a nightmare ... what I've seen in the West is conversion of vacant downtown office space into Lofts and rehab of older houses ( akin to what's happenning in Pangani,etc) ...
I reluctantly went to downtown for business appointments,goverment offices and to meet friends ... how would it be posible to do all this outside of downtown would call for decentralization of servives both private and government ....
More later ...
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Rank: Elder Joined: 5/24/2007 Posts: 1,805
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Good people, I think @pm has brought in a very good point. Once the high yeild business leave town due to endemic confusion and traffic jams,I think that most premises might be turned to residential premises. This will not be new to Nbi,it hapenned in the late 60s to 70s when everyone perferred to live in the city and Pangani was one of the furthest places to live. This trend changed in 1982.This will be preffered due to high costs of housing and high travel costs. I see this in very developed countries where architects design buildings that have both residential and commercial units in one building. Yaani,we may soon be living like the muhindi in river road. You live on top of your shop or office. Hujui jam ni nini,bad roads,matatus etc. when you think of it,it makes perfect financial sense. Do you guys see Nbi heading this way? I Think Therefore I Am
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Rank: Elder Joined: 9/12/2006 Posts: 1,554
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@ Bwenyenye Yes for sure,I can see zoning coming into effect just as it is in Dubai,but may be for now not to the level of dubai but some zoning is on its way coming,stories i have read in SK about an internet and media city is in the plans somewhere in kitengele,will ofcourse go with housing and if they copy paste dubai then what you mention about leaving close to your work area will be the case in that foreseen city
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Rank: Member Joined: 11/11/2006 Posts: 60
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@Jamani,@Bwenyenye,and other esteemed contributors,
What Kitengela is slated for is a 'Technology Park' akin to what one may find in Silicon Valley' (North California- San Francisco to Morgan Hill).... The Kitengela Technology Park sits next to EPZ (correct me if wrong),which is an Industrial Park. The two do not include housing,but there is plenty of land for housing development ... has not looked at proposed zoning there.
What may take place in downtown NRB maybe accelerated conversion of houses/offices into flats,already done- Rapta Road,Parklands,Westlands,Pangani,Harringgam,also,in downtown itself,I was surprised to learn that Hon. Shikuku has a flat just next to that gas station at Koinange Street (not trying to associate Hon. Shikuku with Koinange street),but we may start to find more and more people opting for a flat in downtown instead of commuter madness... Mostly in New York,DC,San Francisco,these flats are not of mixed use,they are strictly residential flats and folks are making that choice instead of many hours of commute.
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Rank: Veteran Joined: 3/31/2008 Posts: 761 Location: Nairobi
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@pm, I thot the Technology Park will be somewhere past Machakos junction along Msa road. I heard that the govt got 3000 acres they were looking for for the park at a place called Konza specifically malili ranch. I think we need to confirm some of these info so that we can position ourselves strategically. ..wise as a serpent,humble as a dove When I admire the wonder of a sunset or the beauty
of the moon, my soul expands in worship of the Creator.
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Rank: Member Joined: 11/11/2006 Posts: 60
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@Marty, The Technology Park is in Kitengela ( headed towards Namanga SW) past Prof. Saitoti farm on the left,its far much bigger than 3k acres,this information has been out for at least three years ... the other interesting place is on the way to Machakos as you leave Athi River,on your left heading to Machakos,that place has terraine/hills that would make one of the finest golf courses in Kenya. All one would need is the design of ( http://www.poppyridgegol...m/virtualtour/tour.html click 'Golf Course' ) in N Cal and voila! Enjoy the Manchester vs Barcelona/ Ronaldo vs Messi two of the worlds best soccer players ... its going to be a match to behold! ;)
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Rank: Veteran Joined: 11/4/2008 Posts: 1,289 Location: Nairobi
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Can someone tell me what effect the return of Kenyans from the diaspora has on our property market. First they influenced the market by pushing up demand. They also dictated the style and taste of the apartments. Now I hear that some need money on their return and this might cause a supply glut.
Fundamentals + Sentiments = Position
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Rank: Member Joined: 11/11/2006 Posts: 60
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@FunAli,
I think Kenya's property market is being fuelled by-
Diaspora
UN/expatriates/diplomatic folks
Middle East money
Refugees
Illicit trades
Genuine Private Kenyan initiatives
Corruption monies
Internal readjustments in view of 2007/08 election violence
Housing demand from tourism
Asian discovery of Kenya
(I’m 90% confidence these are the key factors driving mostly NRB/Kenya property prices)
I hope the above list will persuade you to adjust your premise :) ...
Diaspora returning home does not have as much impact as the 'West's Financial Crisis',which I think will have a negative effect on remittances to Kenya. I don’t think there are that many folks in Diaspora returning ...
What is really pissing Diaspora is that every politician who visit them has been promising 'duel citizenship' without really understanding its deep implications,Diaspora folks are now thinking of helping extract the duel citizen section of the new constitution,and asking a few MPs to see the bill through,secondly,Diaspora has been swindled out of their monies/property and the home judicial system is too slow/cumbersome,setting a special court to expedite Diaspora property cases will help. If these things don’t happen,they will put their monies elsewhere ...
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Rank: Elder Joined: 9/12/2006 Posts: 1,554
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Can someone tell me what effect the return of Kenyans from the diaspora has on our property market.
It depends on alot of things,it could drive the market up if they were sent home with a package,it could increase demand for houses if its a large number returning the will need to stay somewhere and many other things,however as someone said dont expect prices to fall but stagnet maybe for a while in the upper market.
First they influenced the market by pushing up demand. They also dictated the style and taste of the apartments. Now I hear that some need money on their return and this might cause a supply glut.
Our property industry is a small market demand in middle class housing will always outstrip supply,and there are still Kenyans in the diaspora with lots of money and ready to buy houses. it doesnt mean that the Kenyas returning have to sell thier property they can lease or rent it out and not all returning home have property or are broke,i personally doubt that prices will come crushing downwards in Kenya.
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Rank: Member Joined: 3/6/2009 Posts: 172
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An investor is an investor,whether from the diaspora or not.
The question that should be asked is what are the justifications for these unHoly property prices in Kenya. For example a quater acre in Surrey is about 13k gbp. A quater in Eastleigh without roads,water,electricity is going for ksh25 million. Now who's fooling who here?
I for the first time,am in total agreement with Tusker (did I say that?). The Kenyan property market is as fake as the stocko exshagi. There will be major shifts soon and the ones who will make it are the ones who invested outside this fake City.
These are the things that are going to happen in Kenya over the next few years so judge if your 15 million kahouse in South B is worth it.
The internet - Why live in a traffic jam when you can do the same work online living in Kisumu,Nakuru,or Kitengela?
Road Network - The day they finish those roads they harp about all the time will be the beginning of the end of high property prices in the City. Case in point. Once they finished building Rt. 95 and 93 in Boston,all law firms moved from the crowded city to quieter,friendlier areas out of it
Rents - if the rent paid for your property is lower than the mortgage,you have an overpriced property. People can no longer afford to pay 25k for a bed sitter in south C when they can live in Kitengela,Ruiru,Kinoo in a mansion for the same.
The only thing that Kenyans will be doing in the CBD is going to gov't offices. Even the information PS wants to kill that by setting up cyber villages in each and every constituency. Did someone say devolution?
How badly are Kenyan properties overpriced? A three bedroomed new and high class apartment 10 minutes drive from Boston with no killer traffic is going for about 500,000 dollars. An inferior property in Kileleshwa next to a slum and with no water and terrible roads is going for 35 million. Come on guys,even those diasporans you are talking about will see the light soon.
The reason diasporans invested as they did at that time was because they could borrow cheaply in an American bank. Build a house they wished to come and live in after they retire. That was then. Now,credit is hard to come by,stories about being conned are all over,dual citizenship is not there,and they are also not stupid enough not to see that the market is overpriced.
Those that have finished building have already done so,the others won't touch this market even with a gun in their head. They are more likely now to start investing in IT business and other off stocko exshagi businesses.
so don't get too excited about buying a home in Nairobi. Go out further,build your dream home slowly and you will enjoy the fruits of living in a quiet neighbourhood for a long time. Why do you think jungus are building in Naivasha,Malindi,off Mombasa Road etc.
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Rank: Member Joined: 6/26/2008 Posts: 319
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...of 'kujifunika with your fist' or burrying ur head in the sand - is the undoing of the entire scene.
I agree with @nanfor - In some time to come,Nairobi will be unbearable! Right now,it is already a pain to be in Nairobi for whatever reason. Living in Nairobi is even worse with perenial water issues,unjustifiably high rents,house prices and issues of congestion.
There is always a bunch of pple who do this Real Estate business as their primary business - these pple also control the market - they are also the wealthiest in the society. Why do we just love to enrich these 'greedy few'?
Those cashing in now - jiulize where are they going? Those kile houses,where do you think the owners are going to? Not many are leaving the country as they claim.
If Kenya gava realises how useless it is to try 'improve' Nairobi and declares satellite cities or peace returns to Somalia and the soms want to go back home with money to buy property there,Nai property might crash! Speculating I would do for now,but not that prices will rise forever.
Bidii yangu
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Rank: Veteran Joined: 3/31/2008 Posts: 761 Location: Nairobi
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It is a wrong notion to believe that prices will rise forever. However,in the foreseeable future,the rise will be witnessed. Not until when the factors that fuel the rise change materially. Again,it takes time for real estate prices to respond to the said factors,hence it is not clear which direction things will go. Those who have keenly followed the property market are aware that before the Narc govt,real estate was not as vibrant. Again the powers that be influence a lot of what happens in the market. To draw parallel to the stock market,the factors driving the rise of the prices in the recent past did change and the results are there for all to see. I expect the same to happen in real estate at some point,but when is anyone's guess ..wise as a serpent,humble as a dove When I admire the wonder of a sunset or the beauty
of the moon, my soul expands in worship of the Creator.
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Rank: Member Joined: 6/20/2007 Posts: 25
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@fantony
If I sold my flat,I know it would fetch more than the KSh 6.3m that I paid for it but if it fetched say KSh x,there's nothing of similar or better quality right now that I can buy at less than KSh x. So selling it right now is not worth it.
There's a neighbour of mine who pays 45k a month rent. This is in a block of 3br flats with lots of parking,mature trees,and green areas that was done in an era when developers weren't so greedy. The flats under construction across the street are being advertised for KSh 17.5m and they're packed like a pre-Michuki ma3 during rush hour. They're bila sunlight,you can see your neighbour's Homer Simpson Y-fronts from your living room,there's limited parking,and bila green areas. Mortgage interest rates are around 16% p.a. Do the math.
If you're a diaspo,KSh 17.5m ($223,352.50 or £138,393) would get you a much better deal in Stato,Brito,and other western countries where there's low mortgage interest rates,proper urban planning,good infrastructure,good public services,and where property rights aren't shaky like here.
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Rank: Member Joined: 12/9/2006 Posts: 186
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I have keenly followed the discourse on this thread and I must say I am very impressed. I also noticed that there is a tendency here to chase the train which has already left. In my years of investing,I have tried to practice the adage of buying low and selling high. There are certain places in Nai that missed out on the real estate bubble,if I were an investor I would pursue these opportunities now instead of chasing the train that already left(which may soon crash).
I think the future of real estate in Nairobi may be in multy-story highrise condos especially close to the CBD. This is after the security and water issues are finally resolved. One place of interest would be the other side of CBD,towards Jogoo road. This area is very close to CBD yet it has some old estates(cant remember the name,maybe Muthurwa estate?) that I'm sure one can buy now and just sit back and wait for the inevitable price hike.
Could anyone elaborate on the ownership of these houses? My guess is that they are probably owned by the NCC but I am not sure. Either way,that area seems to be poised for the next Upper Hill of Nairobi once it is spruced up and gentrified. What do you guys think?
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Rank: Member Joined: 11/6/2006 Posts: 276
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me thinks ngara serves a more immediate avenue to gentrification. and its more organised on infrastructure and space utility.
plus the area around stima plaza has cleaned up,michuki is sorting out nairobi river,the mechanics will soon have to find another site,kenya railways woke up; looked at their assets list and remembered those tunyumbas around park road.
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Rank: Member Joined: 11/15/2006 Posts: 3
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The houses/Muthurwa Estate was owned by Kenya Railways,the Government has turned the Muthurwa Estate into a Market and Bus Park for all PSV vehicles from Jogoo Rd. Although the Project could have been much better of than how it was done crazy mess altogether.
Landmawe,Makongeni are still Goverment estates owned by KR,Ololo,Shauri,Bahati Botela name them all up to Buru Buru to Doni all old are either NCC or Government which needs to be redesigned. The Future of NCBD may grow towards these areas that will depend on how government may develop or dispose some of these estates,by as Upperhill have now changed totally.
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Rank: Veteran Joined: 7/8/2008 Posts: 947
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Just looking through old thread ..... What a resource wazua is.
The argument for bursting bubbles and dooms day scenarios that have een propergated on this forum since 2007 have still not come to fruition.
The sub prime did not affect the market, post election dented the market in some places but in most areas there was no effect, diaspora being layed and returning home has not affected this property market.
To those who ignored this noise and invested in the late 2000 are smiling all the way to the bank. Example people bough land in syokimau in 2007 would have made 1000% to 3000% profit now. But the bubble still exists.
My point is turn off the noise. We are now in uncharted territory. No one is the master in this field right now. Take the optimism in equal measure with the pessimism!
Live hard play hard .....
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Rank: Chief Joined: 1/3/2007 Posts: 18,056 Location: Nairobi
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@tonystark - It is tough to figure out the top until after it has been peaked... There are many factors that affect the price of properties but bubbles are formed in every asset category including Real Estate. Look at the USA or UK or many other markets. Of course, a GROWING economy will support higher prices (demand driven) but the illiquidity of Real Estate also creates 'sticky prices'... and they play into each other... Greedy when others are fearful. Very fearful when others are greedy - to paraphrase Warren Buffett
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Rank: Veteran Joined: 7/22/2011 Posts: 1,325
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Very nice post, should I infer that the bubble is about to burst? If you consider the downward trend in Western economies, which translates to Diasporans losing jobs and/or banks not lending, the downward trend at the NSE and untamable inflation in Kenya, does all this mean that the property prices will have to come down?? Those prices are ridiculous, and the once far away Kitengela is now extremely high. A property I was looking at has increased in price by $3,000 or ksh 240,000 in a month!!! Is it even worth it? Its a dicey situation coz if you dont buy expecting prices to fall, and they skyrocket after the highways are constructed, you are stuck. But if you buy now a property thats appreciating at $3,000/ month, by the way its in the bush, no elec, water, roads. It just doesnt make sense. Maybe the other alternative is to wait for foreclosures to start happening, then buy bank repos. That may be the only way out.
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