Here is why the property market bubble has burst

By People Daily
Date: May 31, 2016
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Luke Mulunda

Is the property market as lucrative as we are being made to believe?

Of course developers and those selling plots want to make everyone believe so.

But the bitter reality is that the property market is cooling off.

While it may not burst big time like most bubbles do, it is more likely not to give the crazy returns that are promised by vendors, based on the performance of the past 10 or so years.

Recent real estate market development indices by Kenya Bankers Association and Hass Consult have been pointing to a slow down.

This is manifested in a drop in demand for houses and reduction in rents due to an oversupply in certain segments of the market.

While these indices often give a short-term view of things, if looked at in the long term by studying trends, you can see the warning signs.

The verdict from anyone, including lay investors, is that “you can’t go wrong with land.”

In fact, land is responsible for many millionaires in Kenya.

But these people are not telling first-time investors that most of the prime land that delivered the quick riches has shrunk and the remaining small swatches will cost you an arm and a leg. Now investors have moved into agricultural land far off Nairobi and other towns, buying farm land then parceling them into smaller plots.

These are the people who are making a killing.

The smaller plots are sold at prices that give them over 500 per cent returns.

Sellers will use any infrastructure nearby – be it a school, college, road or even factory – to squeeze premium price.

But looking at most of the land on sale, some very many kilometres from the nearest town (in Nairobi the distance is reaches even 70km), you can easily see land is over-valued.

The prices they are going for now are likely to be same prices (or just slightly more) in the next five years since these areas are not developing any time soon.

People who are buying as short-term speculators to double or triple their investments in a year or so are getting so disappointed.

At times they can’t even get interested buyers if they wanted to get their money back.

First-time buyers are looking for a place to set up a home in the nearest future or a plot that can give a decent return in one or two years.

In many cases, an investor who buys one acre of land agricultural land at say Sh400,000 is better off than those buying an eighth at double the price, then waiting forever for the prices to go up.

Before you buy that plot, just conduct a simple feasibility study.


This is true; unapata shamba inauzwa kwa kichaka na unaambiwa it is prime land because it is close to a tarmac yet it is over 100km from any major town


Kuna ile ilikuwa inaitwa Nyahururu green watu wanauzia a plot at 200k at a place where an acre ranges from 300-500k. Enyewe wajinga ni wengi.

Kuna place inaitwa saikeri, 50km from the cbd, 1/8 huko ni btw. 150k-250k depending on how close you are to the “proposed greater southern by-pass”.
Place ingine ni Kangundo road, unakuta places kama Tala, over 60km to the cbd, na bado wana uza ka eigth hiyo bei, what the fuck?

People are so eager to make money everyone is thinking about land, for what? Very expensive and sometimes useless


When almost all people want the same thing prices of whatever commodity skyrocket to absurd levels. As if there’s nothing else people can use to make profit.

I thought I was the only who had this great revelation to forget the stulid 100x50’s and go for big parcels mashinani? oh crap! there goes my getrichquick scheme

and maina kageni is leading gullible masses through his advertisements to buy those overpriced plots


Who will rent your houses in those remote places? I’d rather pay 15k rent five km from CBD for the next 20 yrs than to put my hard earned money in those plots. Meanwhile I can buy bonds and t bills

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I’m finally in this business but in a small way. I did my research and i realized that the market isn’t crushing but rightfully correcting itself after years of record growth and same surplus supply. Most house projects are copy and paste structures which haven’t adjusted fully to the growing expectations of buyers. For example its the same 2/3 lower/middle class bedrooms flats, same bungalows and townhouses. For 5-10% more or a good contractor for the same price you can build and provide a better house with more features that in the past have only existed on upper class houses. Functional features like all en-suite bedrooms with inbuilt ward-ropes. Lockable garage, modern kitchen with drawers/counter tops, big water storage, septic tanks, solar water heaters, emergency solar power for essential areas, good interior design and finally good exterior design. Key is getting the right team, architect-qs-contractor who will handle everything in house and save on cost while working on budget to get a very superior house. By the time the client (either renting or buying) gets to the door and finishes viewing everything, they should have already be planning to move in. Most of what is being build en-mass is cheap housing, with poor finishing in a rush to get it in the market.


Visited several properties 5-10 yr old and occupied. They are in state of disrepair. Very poor quality houses constructed in Kenya.


Good info. But really, this has been said about Kenya’s property market for some time now. It ain’t slowing down any time soon. Is it in KList where we covered this with akina @ochithunder and @mabenda4?

I can confirm better designed houses with more features draw in better tenants/buyers who stay for long. In one project we made a small space for washing machine at the balcony which is the same size as a fridge split into two one on top of the other. It costs maybe 1-2000 to do cos it just pipes for hot/cold water and water outlet for the dirty water. Bottom cube was for washing machine and the top for drier. 3 bedroom flats all en-suite, electric socket with USB port for charging phones, cabling to all rooms for T.V/satellite TV, fibre optic, solar heated water, two car parking and one socket on emergency solar power for essential use only. Finishing was well designed middle class fittings. Women loved it and its was completely taken up by families.


How much for such a unit sir?

We started with 25k but right now if someone moves its 30k and usually the tenant gives a notice and has already picked someone to come and take it up at the higher 30k. The flats are beautiful, secure, well serviced and built at the same cost just simple variations here and there.

Are the units for sale? If so, how much and what’s the location?

Are the units for sale? If so, how much and what’s the location?

There is another project coming up in Ngong but we haven’t broken ground yet that we are considering selling. We are still very small now with only one project so finances aren’t ideal yet. We continue with the study to see if renting will still be better or for sale. It may cost between 7-10 million per unit but we will make the decision conclusively when we are 60% done.


Yes, we had a long discussion and I remeber some chaps telling me to cool off my balls when I argued that the real estate sector cannot collapse in our kind of economy with the current dynamics. That was what 3-5 years ago? We are still waiting and till predicting this “never happening” collapse. Wont happen, not with so much sleaze pouring money into the economy and so much infrastructure build activity on “borrowed” money. And there is no money to be made in real terms with property because if you bought a flat 10 years ago and it is now valued at thrice the build/purchase price, you can only benefit if you dispose and consume, you cant flip because all other properties have inflated at the same rate! Say you saved 10000 dollars in 1964, it would be alot more money in local currency terms today but prices would have risen equally steeply over those many years and that 10,000 may not buy you more than it would have done in 1964, so goes property value. Rental income is well paying for a mabati structure in Kibera and Huruma. All other rental investments would need 15-20years to repay completely.