Business

Nairobi rent prices up 2.5 per cent in three months

An aeriel view of Nairobi City. (Photo: Natalia Pushchina)

By Ibrahim Omar | Monday, February 5, 2024

Upperhill recorded the fastest increase in apartment rent prices at 5.5 per cent, followed by Parklands which grew by 5 per cent.

Rent prices in Nairobi increased by 2.5 per cent between October and December 2023, a new report shows, shedding light on growing struggles by city residents to afford accommodation.

According to the Hass Property Index which was released on Monday by property developer Hass Consult Real Estate, Upperhill recorded the fastest increase in apartment rent prices among Nairobi suburbs of 5.5 per cent during the quarter.

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“Rental prices recovered, rising 2.5 per cent in the quarter, defying the reduced spending power of consumers in the economy due to elevated inflation,” said the report.

This was followed by Parklands, where rent prices for apartments grew by 5 per cent followed by Kileleshwa at 4.1 per cent. Lang’ata was the only city suburb where rent prices for apartments declined, dropping by 2.4 per cent during the quarter.

Among Nairobi’s satellite towns, Ngong recorded the fastest increase in apartment rental prices of 7.7 per cent during the period followed by Ongata Rongai whose apartment rent prices grew by 5.9 per cent.

Rent prices in Mlolongo, however, recorded the fastest decline of 1.7 per cent during the period, while in Thika and Athi River, apartment rent prices dropped by 1.2 per cent and 1 per cent respectively.

Housing deficit

The increase in rent prices is driven by high demand as the city’s population growth exerts additional pressure on the existing housing units. According to the government, Kenya faces a housing deficit of about 250,000 housing units every year.

At the same time, sales prices for properties in Nairobi went up by 4.1 per cent during the three months despite high inflation and weak shilling that raised input costs for developers.

The report shows that Ridgeways, Spring Valley and Lang'ata posted strong quarterly growth in property prices among suburbs, while Juja, Kitengela and Athi River led the satellite towns.

This comes despite difficult economic conditions characterised by high inflation and a weakening currency, which has made it more expensive to import goods into the country.

The elevated inflation, which averaged 7.7 per cent in 2023, has meant reduced spending power for both home buyers and rental customers, while the weaker shilling raised input costs for developers which in high-demand suburbs had inflationary effects on property prices.

“Although the weaker currency raises input costs for developers on ongoing and future projects, it makes the Kenyan property market attractive to foreign investment, buoying asking prices due to augmented demand from these investors,” said Sakina Hassanali, Head of Development, Consulting and Research at Hass Consult.

All 18 Nairobi suburbs recorded higher buying prices, led by Lang'ata, Ridgeways and Spring Valley, while in the satellite towns, Juja, Kitengela and Athi River were top performers during the quarter.

The best rental returns for property developers on an annual basis were found in Ongata Rongai (15.4 per cent), Athi River (15 per cent) Kitengela (11.6 per cent), Loresho (11.5 per cent) and Nyari (9.9 per cent), said the report.