Nairobians in the lower middle-income cluster were forced to relocate from the metropolis as rising rent and hard economic times ate into their incomes.
Hass Property Index, for the third quarter (Q3) of the year, shows high demand for low middle-income housing in far-flung housing estates as tenants opted for cheaper units.
The report shows Thika, Tigoni and Ongata Rongai were the destinations of choice for most Nairobians.
“Apartments in Thika recorded the strongest annual growth rate in rents at 13.3 per cent while houses in Tigoni recorded the highest quarterly rate increase at 3.5 per cent,” said Sakina Hassanali, the company’s head of development consulting and research.
Kitengela, Mlolongo, Ruaka and Limuru also posted increased asking rent prices.
Parklands recorded the strongest growth in apartment rents marking a 1.9 per cent increase in the Q3 and 9.3 per cent annually.
Senior manager of regional markets at Cytonn Investment Jonson Denge attributes this to developers moving away from the CBD due to high land prices.
“County governments near Nairobi have also helped to improve amenities helping to attract developers to the relatively cheaper land,” said Denge.
Denge says developers are more likely to break even away from the CBD whose land prices range from Sh80 million to Sh207 million.
Unfavourable economic conditions, however, continue to dictate the overall rental and property sales markets.
Rental prices for all properties have fallen by 0.9 per cent in Q3 and asking house sale prices have grown by 0.9 per cent in the last three months.
Semi-detached housing units posted strongest total returns at 13.5 per cent which was a total of capital gains and rental yields.
This was driven by investors who prefer the mid-market over detached houses which are more expensive and apartments where there is an oversupply and as a result rents are often discounted to attract tenants.
Upper Hill recorded a price correction after the suburb saw a reversal in prices after three years, during which costs of apartments have been on a downward steep as discounts continue.
On the other hand, Nyari and Loresho continued to benefit from the completion of the Redhill Waiyaki Way Link Road.
“The government is really ambitious with infrastructure development which has brought positive impact to the real estate business,” said Hassanali.
Affordability and increased accessibility has also spurred Ngong and Thika apartment’s rental market as tenants tighten belts in these tough economic times.
Denge said CBD is no-longer the only place to work as Westlands, Ngong Road, Gigiri, provide employment for many in Nairobi.
Increased infrastructure projects by the government have also opened up other areas for development.
“Asking rents for a modern apartment may be as little as Sh23,400 and this bodes well for many tenants who are now preferring affordable units as they take caution to save in the wake of job losses across all sectors. Notably, as the cost of living soars, the lower middle class is opting to pay slightly more in transport but less in rents,” said Hassanali.