Sh 300, 000 – 400,000: Rent per month for a five-bedroom unit in the leafy suburbs.
Sh 95,000: Average rent for a three-bedroomed house in Kileleshwa in December last year.
Sh 160,000: The average monthly rent in Nairobi’s top segment as at December 2011
A drive through the exquisite Red Hill residential neighbourhood, popular with the diplomatic folk, gives the prospective tenant or home buyer lots of reason to look no further for the ideal home.
Virtually all homes in this leafy suburb are single family dwellings, sitting on expansive compounds where the interiors are superbly finished while the ambient outdoors are complemented by the mature garden.
Own swimming pool and a garage for four cars are common extras to justify the rental prices, mostly ranging between Sh300,000 and Sh400,000 per month for a five-bedroom unit with some quoting their figures in US dollars.
But all is not well, at least for landlords who own homes in these exclusive residential areas, and that is because these homes are taking much longer to attract the targeted tenants to the extent that these occupancy rates are beginning to worry real estate experts who have, for some time, warned of an impending supply glut.
As a result, landlords had to downgrade their rents by close to a tenth last year alone in the hope of attracting tenants and boosting their occupancy rates according to real estate firm Hass Consult.
The scenario has been replicated in several similar neighbourhoods including Kitisuru, Hill View and Spring Valley while a reversal on these falling rents does not seem in sight.
While a further rental declines may not go down well with investors in the market segment, a continued slide would likely spur interest among members of the emerging middle income class and the newly rich. Many would be looking at moving into these hitherto out-of-reach residences.
An agent with a leading property management firm disclosed that a 10,000 square foot five- bedroom villa – all ensuite, has been on offer since July last year and none of the potential tenants is ready to pay the Sh280,000 the landlord is asking.
The asking price was initially at Sh300,000 which the owner had to review downwards in December last year after the house remained vacant for five months.
In its 2011 housing survey, Hass Consult said there were hardly any takers in the top segment of the housing market to spur any price gains on both rents and sales.
Farhana Hassanali, the development manager at the firm cited several reason for this sub dued demand. One was a shift in the market towards cheaper housing at the top end where developers have consistently supplied new homes for over a decade.
This finding makes the high-end market most vulnerable as households across the market review their rental expenditure to accommodate increased expenditure on other more pressing needs as budgets become tighter.
While some households may have resolved to downgrade to cheaper homes to navigate the tough economic environment, even more people today are finding buying their own homes to be a more attractive option to renting.
These people are opting to buy or build their own dwelling homes in the same areas or in slightly cheaper zones where they get more space for lower than they would get in these higher class zones.
Such was the situation for the family of Juliette Wawera, the last born in a family of three, whose parents moved from a rental home in Kileleshwa in November last year to their own home in Embakasi.
Wawera, who works in a bank was born and bred in Kileleshwa, which Hass Consult ranks as Zone B where most households belong to the upper middle income class group and where average rentals for a three-bedroomed house were at Sh95,000 in December last year.
“My parents wanted to settle down in their own home so we had to move from a rental house in Kileleshwa so they could put the money saved into securing their own home. Even though they would have preferred to continue living in the area, land purchase prices and even those of finished buildings, were out of their reach” she said.
Average home prices in Kileleshwa and the neighbouring estates then were Sh21.5 million, more than double the Sh9.3 million that a buyer can expect to pay for a house in Embakasi – home to middle to lower income earners.
Many Nairobians are also looking at places like Kitengela and Athi River and the new estates coming up towards Thika where buying and renting is still relatively cheaper.
Hass Consult numbers showed that neighbourhoods in zone C including Langata, Madaraka, Buru Buru, South C and B and Donholm reported the strongest gains in both rentals and selling prices as a result of increasing pressure from the higher income estates.