Property Boom Where Is The Money Coming From?

One thing the article failed to take into account is the informal sector.

WHAT Kenyan homebuyers want, at least according to Eddah Musyimi, a property-seller, is a picket fence, friendly neighbours and safe streets for their children to play in. She works at Bahati Ridge, a development near Thika, a town around 50km (30 miles) north-east of Nairobi. For 13m shillings (about $125,000), well-off Kenyans can buy a nice-looking semi-detached house with about a quarter of an acre of garden. The mock Tudor facades and herringbone paving hint at middle England, but in other ways the area would blend easily into Houston or Tampa. With most of its residents commuting to Nairobi along a new motorway, it is one of the Kenyan capital’s first exurbs.

Nairobi has long been a city of colonial villas for the wealthy and privileged, and teeming slums for almost everyone else. But a building boom is starting to change that. At the edges of the city, and in towns nearby, new suburbs are fast replacing coffee plantations. Towards the centre ageing bungalows give way to towering apartment blocks. Property prices have increased almost fourfold since the early 2000s, according to Hass Consult, a local agency. It certainly feels like a frenzy. Property brochures litter shopping malls; empty plots of land sport signs announcing that they are not for sale, to deter con artists who try to sell land they do not own. And yet behind it is a mystery: nobody is quite sure where the money is coming from.

One thing that is not fuelling the activity is a mortgage boom. According to estate agents, just 22,000 home loans exist in the whole of Kenya, and half of these are reckoned to be to bank employees at preferential rates. Loans at market prices are punishingly expensive, carrying interest rates around 15% or higher. Rents, by contrast, are cheap: mortgage repayments can be two to three times as dear. As a result, almost nobody gets a mortgage to buy a house to live in.

Instead, says Sakina Hassanali of Hass Consult, the vast majority of properties are being sold to investors, who pay in cash. They are not interested in rental yield, she says—they just want a relatively safe store of money in a country that has high inflation and an underwhelming stockmarket. Extended families will often club their savings together to buy a property as a sort of family trust fund. It helps that owning land is seen as a signifier of wealth in Kenya. “If you own land, in the worst-case scenario, you can still grow crops, it comes from that,” says one young Kenyan financier. He explains how, despite his misgivings, he was still persuaded by his family to invest in some property outside Nairobi.

The source of this glut of cash is unclear. Some comes from savings; some from emigrants who repatriate earnings from abroad. But there are hints of less salubrious sources. The spoils of corruption are rarely kept in foreign bank accounts these days. Instead, they are invested at home. And just as Russians are blamed for inflating house prices in London and New York, in Kenya some blame rich Somalis.

Many well-off Kenyans worry that a crash is coming. But since the bubble is not puffed up by borrowing, that seems unlikely. The commercial-property market may deflate a little, thinks Edward Burbidge, an investment banker based in Nairobi: shopping malls are being built in places where the population density is far too low to support them. The challenge for investors is to find tenants to fill all the new houses. They had better hope that Kenyans really do want to live the suburban dream, picket fence and all.


You can tell from the word go this is not a Kenyan journalist, our journalist would either be advertising an upcoming estate or predicting doom in a market they barely understand. I don’t know why lots of journalists will compare the our real estate to that of USA pre credit-crunch. Prices will stagnate at some point as everyone is buying an undeveloped and non-serviced broti in bundus, but a crush/bubble bust, that my good friends is not coming.


Nice read

I think the most likely source of funds are drug dealing and corruption. With cases like the one facing Chris okemo and gichuru, very few Kenyans are likely to stash ill-gotten wealth abroad. As such, they invest it in real estate whose traceability is difficult given the poor record keeping in land matters.

this small town of ours has had a property boom over the last few years,hadi kuna Mall iko karibu kufunguliwa… Shida ni,there doesnt seem to be anyone willing to move into these new fancy flats.

:slight_smile: Naona rents zikishuka soon as landlords desperately try to woo in tenants otherwise they wont recover their investments

…this is well researched.

Once in a while i take a stroll and have a look at the upcoming projects:

Case 1 - Rosslyn Estate - the least stand alone is Kes 85m. Unless dealing with Drugs no employee can afford this -only two units remaining!!
Case 2 - Runda Paradise/Four Junction Estate - Kiambu Road - Average Kes 35m - now in second Phase!!!
Case 3 - Mimosa Estate (Runda) - average Kes 100m or Rent per month KEs 0.4M!!! - all gone

Hii Pesa inatoka wapi?

ha,ata kama ni ya drugs,i dont think the kenya market is big enough for a dealer to afford such

The informal market my friend. There are guys earning millions tax free. Kuna mjamaa who has a business huku 3rd world (Riva Rori) that earns like 15M every month tax free, he’s now putting up rental units in Thindigua and Kasarini right opposite Runda paradise.

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…Anauza nini hiyo haujui?



no research if he/she didnt feature the sentimental values we africans esp okuyu attach to land. it is very rare to meet a kenyan without plans to own a kapiece of earth.
i once lived pale ghetto ya tassia pipeline,i had this neighbour who always bragged of owning tuplots in juja farm. which was a wasteland before completion of superhighway.
the plots were going for 40-60 k,so alijinyima akanunua tatu. now they are worth more than 1.5 million
i dont whether he still lives in the ghetto ama alihama.
the property boom will continue esp with the emerging of the new rich.
kama ile plot ya half iko karibu na nhif is going for 2 billion,you want to tell me when the burst occurs maybe three years from now itashuka bei?
if anybody wants to predict our property market ,he should include.
1)sentimental value attached to property.
2)forces of demand and supply.
4)now the rest of the factors

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Are the guys who bought the property living there ama they are buying and renting them out? Waaaa! Rosslyn ni 85 million, what do I know.

Thats an explanation I can swallow, I also don’t believe drug money is enough to to drive real estate like this

kenya govt has poor mechanisms to vet immigrants so its easy for thieves from other parts of the world to come in and pour their ill gotten money here eg south sudan, somalia, west africa and europe.
another source is from corrupt govt officials and tenderpreneurs who make alot of money since the anti corruption is inefficient. This has in turn made land very expensive for average kenyans.


Mujamaa, just a quick question. Do you have an idea of BIO DIGESTER septic tanks and the people who install or deal with them.

That building coming up at Tusker stage. The local grapevine says it’s related to the heat being raised by corruption in NYS.
;)Am not naming names.

Hehehe…remember the saga of overpriced water dams during the previous gov’t that were never built yet billions disappeared? Same story in a neighboring town.

The greater fool theory states that the price of an object is determined not by its intrinsic value, but rather by irrational beliefs and expectations of market participants. A price can be justified by a rational buyer under the
belief that another party is willing to pay an even higher price. In other words, one may pay a price that seems “foolishly” high
because one may rationally have the
expectation that the item can be resold to a
“greater fool” later.