Housing costs in Kenya. Why cost of acquiring a home in Kenya is high.
On average, Kenya has one of the lowest construction rates in the world. Kenya also has one of the highest land prices in the world, much higher than in developed countries such as USA.
Housing cost can be divided into 3 basic categories.
1.Low cost
2.Middle cost
3.High cost
Low cost housing.
This costs an average of kes 20,000 per m2 to construct. These houses are mostly in areas such as Kayole, and over 2 km from tarmac in major towns around Nairobi.
The breakdown is as below.
| low cost | ||
| Cost Item |
Kshs |
% |
| Land |
500,000.00 |
16.58925017 |
| Preliminary |
20,000.00 |
0.663570007 |
| Construction |
2,000,000.00 |
66.35700066 |
| External Works |
20,000.00 |
0.663570007 |
| Contingency |
4,000.00 |
0.132714001 |
| Professional fees |
100,000.00 |
3.317850033 |
| Project Management fees |
10,000.00 |
0.331785003 |
| Marketing |
0.00 |
0 |
| Financial Charges |
360,000.00 |
11.94426012 |
| Total |
3,014,000.00 |
100 |
From this, we can see land cost is around 16.5 % of total housing costs. This is more or less within the international averages of 20%.
This means that in low cost housing, bank interest at 11.9% of total housing costs is what needs to be adjusted so as to reduce costs.
Middle cost housing.
| middle | ||
| Cost Item |
Kshs |
% |
| Land |
1,500,000.00 |
32.34501348 |
| Preliminary |
20,000.00 |
0.431266846 |
| Construction |
2,500,000.00 |
53.9083558 |
| External Works |
25,000.00 |
0.539083558 |
| Contingency |
5,000.00 |
0.107816712 |
| Professional fees |
125,000.00 |
2.69541779 |
| Project Management fees |
12,500.00 |
0.269541779 |
| Marketing |
0.00 |
0 |
| Financial Charges |
450,000.00 |
9.703504043 |
| Total |
4,637,500.00 |
100 |
In middle cost housing, using the average cost of construction at kes 25,000 per m2 for a 100m2 house, the land cost is 32% of the total housing cost. This is higher than the international average of 20%.
Such areas as Kitengela, Ngong, Ruiru where a 1/8th piece of land costs 1.5m will give the scenario above.
The financial charges, with interest rate at 18% is also quite high.
Solution will be for Government to look for ways that will reduce interest rates and reduce cost of land.
High cost.
| high cost | ||
| Cost Item |
Kshs |
% |
| Land |
3,000,000.00 |
40.62563478 |
| Preliminary |
20,000.00 |
0.270837565 |
| Construction |
3,500,000.00 |
47.3965739 |
| External Works |
35,000.00 |
0.473965739 |
| Contingency |
7,000.00 |
0.094793148 |
| Professional fees |
175,000.00 |
2.369828695 |
| Project Management fees |
17,500.00 |
0.23698287 |
| Marketing |
0.00 |
0 |
| Financial Charges |
630,000.00 |
8.531383303 |
| Total |
7,384,500.00 |
100 |
For high cost housing, an abnormally huge percentage of housing costs are taken up by land. The 40% land costs are way beyond the average 20% in other parts of the world.
In high class neighborhood such as Kahawa sukari, garden estate etc, most of the housing cost is taken up by the land.
Conclusion.
Land price appreciation in Kenya on average has a rate of between 25 to 100% annually.
Last year the price of 1 acre of land in Upper Hill CBD was kes 250m.
Current asking prices for the same acre is kes 400m. This represents a 60% appreciation rate per year.
Last year a residential plot in Syokimau 1km form tarmac was going for kes 1.5m. Its currently selling for 2.5m. This represents 66% appreciation annually.
This appreciation on land price is higher than the international average of 5 to 10%.
Construction cost for a middle class building in 2008 was kes 18,000 per m2. After 5 years, it has gone to kes 25,000.
This represents 8% annual appreciation rate which is normal and in tandem with the international rates.
Clearly, Kenyan land appreciation rates have gone viral and only the Land Commission can tame this with the introduction of Idle land taxation.
Francis Gichuhi Kamau, Architect.
info@a4architect.com
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