NAIROBI PROPERTY VALUES Q and A.
1. Some houses are fetching up to between Sh110m and Sh200m, do you know a more expensive residential house in Kenya?
The price of a house is mainly dictated by the price of the land it sits on.
Currently, 1 acre of land in Gigiri near the UN Complex is going for KES 150m. Add the cost of construction, say KES 40m. This brings the value to KES 190m. Some residential houses in upper hill area where an acre of land is going for KES 300m will cost over 300m. Buyers of such property usually demolish to pave way for high rise developments that can utilize ground plus several other floor levels.
2. Which areas are houses generally expensive and why?
Muthaiga, Gigiri and Upper hill. This is because the areas have perfect city council zoning controls and services and are in close proximity to UN, USA and British High commissions.
3. What type of people usually buy such houses?
International bodies such as countries for their ambassadorial residences. NGOs affiliated to UN and World Bank.
4. Considering Kenya’s GDP, what makes some houses in Kenya so expensive?
Presence of UN complex and Kenya’s geographical position in relation to mineral exploitation in the larger East Africa region.
5. Does a buyer of a home worth Sh200 million in Kenya get value for his/her money?
For the International organizations, it makes business sense. The occupants will not have to travel far from their places of work, mainly, USA Embassy, UN Complex, Israeli Embassy and British High Commission. The occupants also feel safe and secure in this era of terrorism.
6. There are people who argue that most Kenyans are moving from paying rent to paying extortion fee (servicing outrageous mortgages). What is your take?
The mortgage rates in Kenya are quite high. The construction costs are relatively constant and for the last 5 years , have not increased by a large margin. On the other side, the land prices have increased by very high margins during the same period. This has resulted to very high house costs.
A simple calculation before buying a house can enable a buyer to project the advantages. For example, if someone bought a 3 bedroomed flat in Kileleshwa 5 years ago for KES 10m and 20% interest rate for 10 years, the monthly bank payments will be KES 200k.
They will have paid a total of KES 200k x 12months x 10 years = KES 24m.
The property appreciation rate on average for Nairobi is 20% per year. This means that after 10 years, the property will be valued at KES 30m. They will have made a net capital gain of KES 6m.
This shows that the mortgages are working well for people who will care to do simple capital gains calculations. The calculations could give negative capital gains for properties which are not appreciating at a high rate.
Architect Francis Gichuhi Kamau.