Housing costs in Kenya. Why cost of acquiring a home in Kenya is high.

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

Francis Gichuhi (692 Posts)

Architect Francis Gichuhi . B.Arch. University of Nairobi. Registered Architect, Kenya. Member, Architectural Association of Kenya. Contacts. email info@a4architect.com. Telephone +254721410684


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