House prices in Nairobi’s Eastlands area are expected to come under pressure as the government searches for 200 residential units for administration police officers.
The state intends to buy a mix of four, three and two bedroom houses in Buru Buru, Kayole or Umoja estates clustered in one area.
This would raise demand for housing in the densely populated part of the capital that already has a net supply shortage.
Alphonce Osewe, the general manager of Azizi Realtors, a property firm with development projects in close proximity to the targeted estates, said that the fresh demand could push home prices even further up.
“It will compound the shortage in the middle-income segment where sales have been very strong, especially last year, despite the sharp increases on interest rates,” said Mr Osewe, adding that another arm of government had bought out the entire stock of apartments in Oyster Village, near Kayole.
A four bedroom town house, for instance, that was selling for Sh8.5 million at the beginning of last year is now priced at Sh11 million at the Oyster Village.
Mr Osewe attributed the jump to growing demand, especially in the first half of last year, as the area also benefited from access road repairs and the completion of the multi-billion Greenspan Estate, nearby.
Joseph Gitonga, a director at Value Zone, another property consultancy firm, said that the government may find it hard to get the targeted number of houses in one area.
According to estimates by real estate firm, HassConsult, the transaction could be valued at about Sh1.5 billion.
A survey by HassConsult released last week shows there has been a sharp increase in prices of middle-income residential houses like the ones targeted by the government.
Average home prices edged up to Sh9.3 million per unit at the end of last year in the areas designated as Zone C according to the survey, a nearly 50 per cent increase from closing prices as at June 2010.
Experts at the consultancy firm attributed the price gains to underinvestment in the middle income housing segment, with developers having a bias for the high-end market, which is now feared to have been oversupplied.
“The ongoing climb of house prices (in middle income estates) speaks to the mismatch between housing demand and new construction with an ongoing tendency to over-deliver at the very top and building too little further down the property chain,” said Farhana Hassanali, the development manager at the consultancy firm.
A senior procurement official at the Ministry of State for Provincial Administration and Internal Security said that the government has settled on the decision to buy houses due to the ever-rising rental prices.
“Buying homes for the officers is the cheaper option compared to letting in the long run,” said the official who requested anonymity as he is not authorised to speak to the press.
Senior administration officers are currently housed in rental houses while some have had to make do with informal housing within the camps.
The official said the move was in line with reforms being undertaken in the police force.