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Nairobi Metropolitan Area Residential Report 2023

“Resilient Market with Steady Growth Potential”

Date: May 8, 2023

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Table of Contents
1I Overview of Real Estate in Kenya
Kenya

II
2 Nairobi Metropolitan
NMA Commercial Residential
Office Report
Report 2023

A Introduction

B. Residential Market Performance

C. Investment
CommercialOpportunity
Office Market Performance

D.D Conclusion andOpportunity

Office Space Outlook

Office Market Conclusion ad

Outlook

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.

I. Overview of Real Estate in Kenya

Overview of Real Estate in Kenya
Kenya's Real Estate and construction contribution to GDP declined by 0.1% points to 15.9% in FY’2022, from
16.0% in FY’2021
Factor Characteristics Sentiment

• Kenya's Real Estate and construction contribution to GDP came in at 15.9% in 2022, a 0.1% points
decline from 16.0% in 2021 attributed to: i) the rising costs of construction materials hindering investments.,
ii) the completion of major development projects in the country such as the Nairobi Expressway, Eastern
Bypass, and, iii) the government’s decision to cut back on infrastructure expenditure in FY’2022/23 by
21.4% to Kshs 174.0 bn, from the Kshs 221.3 bn previously allocated which slowed down activities in the Neutral
construction sector. Moreover, the Real Estate sector GDP growth came in at 4.5% in 2022, a 2.2%
points decrease from 6.7% in 2021. This was attributed to increased cost of construction materials
which hampered optimum investments, and reduced investor confidence as most investors, for the
most part of the year adopted a ‘wait-and-see’ approach in anticipation of the August 2022 general
elections
Macro-economic • We expect the sector’s contribution to GDP to improve going forward supported by improved
Contribution investor confidence following the peaceful conclusion of the general elections, and increased
activities across different themes. The construction sector's performance is anticipated to improve
supported by focus on development projects, under the affordable housing initiative and
completion of ongoing infrastructure projects
• However, inflationary pressures still persist as a result of supply chain bottlenecks worsened by
the Russia-Ukraine war, contributing to the increased costs of construction materials. We expect
this will hamper optimum investments in the Real Estate and construction sectors
• Compared to traditional forms of asset classes, Real Estate maintains relatively stable returns at
7.1% which are boosted by price appreciation that occurs over time, and increased demand for
Returns Real Estate facilitated by Kenya’s positive demographics Positive
• We expect the sector to continue outperforming traditional asset classes and to continue attracting
investors due to its and relatively low volatility to the market trends

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Overview of Real Estate in Kenya - cont.’
Our outlook for the Real Estate sector is NEUTRAL due to constrained access to financing limiting
development activities, despite expected increased activities in the Real Estate and Construction sectors
Factor Characteristics Sentiment

• With Kenya being ranked #56 out of 190, as at 2019, in the ease of doing business ranking
according to World Bank, this has attracted institutional and international players who continue
New Players to enter the property markets supporting development activities. The most recent international
entrants include JP Morgan Chase & Co., an American investment bank, and United Nations
Office for Project Services (UNOPS)
• Additionally, increasing traction towards alternative financing models for Real Estate Positive
development such as joint venture deals and Public-Private Partnerships (PPPs), are expected to
continue attracting international players to the country

• Our outlook for the sector is NEUTRAL due to lenders tightening their lending requirements and
demanding more collateral from developers as a result of elevated credit risk, thereby limiting
Market Outlook financing for development activities,
• However, we expect the sector’s performance to improve supported by emphasis on affordable
housing fetching Kshs 27.7 bn in budgetary allocation in FY’2022/23, and completion of ongoing
infrastructure developments which will in turn open up new areas for investments and increase Neutral
property values,
• On the other hand we expect that the 4.4% reduction in government’s allocation for
Infrastructure, Energy, and Information and Technology (ICT) for the FY’2023/24 to Kshs 398.2
bn, from Kshs 416.4 bn, will weigh down on the optimum performance of the sector

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Introduction to Real Estate in Kenya - GDP Contribution
The Real Estate and Construction sectors’ contribution to GDP decreased to 15.9% in 2022 from 16.0%
recorded in 2021
2019 2020 2021 2022

Agriculture 18.6% 19.5% 18.1% 17.1%

Manufacturing 8.7% 8.7% 8.6% 8.5%

Wholesale & 8.3%

8.3% 8.3% 8.4%
Retail Trade

Hospitality &
Tourism 1.2% 0.6% 0.9% 1.0%

Real Estate &

Construction 15.2% 16.1% 16.0% 15.9%

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2. Nairobi Metropolitan Area Residential
Report
Executive Summary
The average y/y price appreciation in the residential market came in at 1.1% in FY’2022/23, 0.2%
points higher compared to a price appreciation of 0.9% recorded in FY’2021/22
• To gauge residential performance in 2023, we carried research in 35 nodes within the Nairobi Metropolitan Area (NMA)
• According to the research, the residential sector recorded improved performance with average total returns registering a
0.4% increase to 6.2% in FY’2022/23, from 5.8% recorded in FY’2021/22. The average y/y price appreciation in the
residential market came in at 1.1%, 0.2%-points higher compared to a price appreciation of 0.9% recorded in FY’2021/22

• The average rental yields recorded a 0.2% points increase to 5.1% in FY’2022/23 from 4.9% in FY’2021/22, due to
increased rental rates as landlords increased asking rents with increased costs of development through the period

• The improvement in performance was largely driven by: i) infrastructural development, ii) government and private sector
focus on affordable housing, and iii) focus on mortgage financing through the KMRC. However, various challenges such as
constrained access to financing to developers, and rising construction costs due to inflationary pressures hampered the
sector’s optimal performance

• Kenya has an 80.0% annual housing deficit, as only about 50,000 new houses are delivered each year against a demand
for 250,000 units per year hence the demand outstripping supply at an average of 200,000 houses every year

• Detached units registered an average total return of 5.8% y/y while apartments recorded an average total return of 6.5%
y/y. Detached units in Ruiru, Juja, and, Ngong, recorded the highest average y/y returns at 7.8%, 6.9%, and 6.6%,
respectively, while apartments in Ruaka, Waiyaki Way, and, Ruiru, recorded the highest average y/y total returns of 7.5%,
7.4%, and, 7.4% respectively
• We expect reduced purchasing power among buyers amid the tough economic environment brought about by inflationary
pressures on the back of a weakened shilling against the dollar is expected to further hamper the purchasing power of
buyers. This is as prices of essential items continue to soar, thereby leading to slow uptakes of residential units
consequently affecting the residential performance. However, we expect the growing middle class to pivot demand for
residential units

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NMA Residential Report – "Resilient Market with Steady Growth Potential”
Residential average total returns registered a 0.4% points increase to 6.2% in FY‘2022/23 from
5.8% recorded in FY’2021/22
Value Area Summary Effect

• Kenya has relatively high urbanization and

• Currently, the AHP pipeline boasts about 25
population growth rates which will continue to affordable housing projects, with an estimated
Demand & provide sustained demand for more housing units 47,787 housing units by the government and
Supply in the country. The government has made efforts • 50,225 housing units by the private sector under
to increase the supply of housing through availing construction. This is as 200,000 housing units
land to county governments for the construction of are targeted to be delivered per year
affordable housing units

• Residential average total returns registered a • We expect more improvement improved

0.4% points increase to 6.2% in FY‘2022/23 from performance following development of
Returns 5.8% recorded in FY’2021/22 infrastructure serving to open up areas for
• Rental yields improved averaging at 5.1% in development and easy access for residency
FY’2022/23 compared to 4.9% in FY’2021/22 which are expected to boost property prices and
hence better returns
• We expect investors to focus on satellite towns
• Investment opportunity for detached units lies in
due to high total returns for detached houses,
areas such as Ruiru, Juja, and Ngong, while for
Opportunity & which came in at 6.0% in FY’2022/23, 0.2%
apartments, investment opportunity lies in Ruaka, points higher than the detached market average
Outlook Waiyaki Way, and Ruiru driven by the current
of 5.8%. Apartments in satellite towns recorded
performance in terms of returns to investors an average return of 6.9%, 0.7% points higher
than the apartments market average of 6.2%
The reduced purchasing power among buyers amid the tough economic environment brought about by inflationary pressures
on the back of a weakened shilling against the dollar is expected to further hamper the purchasing power of buyers. This is as
prices of essential items continue to soar, thereby leading to slow uptakes of residential units consequently affecting the
residential performance. However, we expect the growing middle class to pivot demand for residential units

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A. Introduction
 Factors Affecting Residential Demand in 2023
We expect Kenya’s positive demographic will continue to drive up the demand for Real Estate
developments
Factor Characteristics

• According to Kenya National Bureau of Statistics (KNBS), the Kenyan housing market still faces an acute
housing shortage of more than 2.0 mn units. Additionally, the Center for Affordable Housing Finance Africa
(CAHF) estimates the housing deficit in Kenya stood at 80.0%, as at the end of 2022, given that only about
Housing Deficit 50,000 new houses are delivered each year against a demand for 250,000
• The government through the AHP has purposed to narrow this gap, and as such, affordable housing continues
to attract more demand propelled by the increasing entry of private sector players through Public Private
Partnerships (PPPs)

• Kenya continues to witness positive demographics as evidenced by Kenya’s relatively high urbanization and
population growth rates of 3.7% p.a and 1.9% p.a, respectively, against the global averages of 1.6% p.a and
Demographics 0.9% p.a, respectively, as at 2021. As such, the demand for Real Estate development in the country continue
to increase

• High mortgage interest rates currently at 11.3% and high transaction costs, have made it difficult for low- and
middle-income earners to afford mortgages
Access to Credit
• However, we anticipate the increased collaborations between sector players and the KMRC, will aid remedy
the situation. Low interest rates of from 9.5%, will improve performance of mortgage lending by making
home loans more accessible and consequently increase uptake rates in the country

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 Factors Affecting Residential Supply in 2023
Constrained access to financing, rising construction costs, and inadequate infrastructure expected to
affect residential supply in 2023
Factor Characteristics

• As a result of elevated credit risk in the Real Estate sector which is evidenced by the 7.5% increase in gross
Non-Performing Loans (NPLs) to Kshs 80.3 bn in Q4’2022 from Kshs 74.7 bn recorded during Q4’2021,
lenders continue to tighten their lending requirements and demand more collateral from developers
Constrained Access to • This we expect will hamper investments by limiting developers access to funding thereby slowing down
Financing development projects

• Construction costs have remained high averaging at Kshs 5,210 per SQFT in 2022, a 5.0% increase from Kshs
4,960 per SQFT recorded in 2021, attributable to price increase of key construction materials such as
cement, steel, paint, aluminium and PVC
Rising construction costs
• The increase is mainly attributed to persisted inflationary pressures on the back of supply chain disruptions
as a result of the Russia-Ukraine war. As such, we expect this will continue to impede development
activities in the sector

• Inadequate and substandard infrastructure in many regions of the country will continue to impede
development operations due to lack of accessibility, limiting supply. Additionally, inadequate drainage and
sewerage infrastructure in some places will continue to hinder developers, due to the anticipated additional
development costs of projects
Inadequate
Infrastructure • Additionally, we expect the government’s decision to cut back the government’s decision to cut back on
infrastructure expenditure until stalled projects are completed will slow down development of
infrastructure across the country, thus further limiting supply

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 Recent Developments
The government has continued to introduce a host of measures to improve transactions in the Real Estate
sector in FY'2022/2023
• In FY’2022/23, the government announced the following regulations, policies, measures, and proposals affecting the
residential sector namely:
a) Mortgage Plan: President William Ruto floated a mortgage plan that will allow tenants to own homes under the social
housing tenant purchase scheme, and, affordable housing initiative, through monthly rental payments
b) Retirement and Benefits Act review: The Retirement Benefits Authority (RBA) announced plans to have pension
managers publish data on the number of Kenyans who use their retirement savings to purchase homes by January 2023
c) Stamp duty Act amendment: President William Ruto announced plans to exempt all first-time home buyers from paying
stamp duty. This comes two years after the Stamp Duty Act was amended in 2020 to allow exemptions for first time
home buyers of only approved affordable housing units by the government
d) Draft Valuation Roll 2019: Nairobi City Hall issued a notice on the increment of land rates to 0.115% of the current value
of undeveloped land in Nairobi County based on the 2019 Draft Valuation roll, from 1st January 2023,
e) The Finance Act 2022: The Finance Act 2022 became effective as of 1 January 2023, with the Capital Gains Tax (CGT)
chargeable on net gains upon transfer of property tripling to 15.0%, from the 5.0% previously chargeable.
f) The Finance Bill 2023: The Kenya National Treasury presented the Finance Bill 2023 to Parliament with an introduction of
a new amendment in Section 31 of the Employment Act, The amendment recommends a 3.0% deduction on the basic
salaries of both public and private sector employees who qualify for the low-cost housing scheme. This deduction will be
matched with another 3.0% from their respective employers, and the total deduction will not exceed Kshs 5,000. The
contribution will be directed to the National Housing Development Fund

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Recent Developments – cont.
In FY2022/2023, we continue to see aggressive focus on the affordable housing initiative and
infrastructural development, and increased funding for homebuyers seeking mortgages

• We continue to see increased focus on the Affordable Housing Programme (AHP) by the National and County
governments and the private sector. Currently, the AHP pipeline boasts about 25 affordable housing projects, with an
estimated 47,787 housing units by the government and 50,225 housing units by the private sector under construction.
This is as 200,000 housing units are targeted to be delivered per year

• Regarding provision of finances for the demand side of residential units, the government continues to increase its effort to
provide affordable mortgages through the Kenya Mortgage Refinance Company (KMRC). This is aimed at making home
ownership more accessible to Kenyans by providing long-term, low-interest home loans to potential home buyers. In
2022, KMRC refinanced 1,948 mortgage loans valued at Kshs 6.8 bn, representing a 278.0% increase from 574 home
loans valued at Kshs 1.3 bn disbursed in 2021

• Additionally, we continue to notice increased diversified residential projects such as Master-planned Communities, Lifestyle
living, Conservancy Living Developments and many more. Such projects are expected to be more vibrant and attractive
not only locally but to also international markets. Investors and buyers will benefit from the increased diversification in the
sector thus discerning appetite for luxurious amenities, conservation-minded and eco-friendly developments cropping up
in satellite towns. The availability of affordable development land in these areas, coupled with limited supply within
Nairobi City and in other major urban centers countrywide, will draw more high-end buyers and investors in the regions
and promote further development

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B. Residential Market Performance
 Market Performance Summary
We conducted research in 35 sub-markets and categorized them into High End, Upper Middle and
Lower Middle segments
• We conducted research in 35 various sub-markets in the Nairobi Metropolitan Area (NMA) to determine uptakes
through selling, occupancy rates through renting and total returns by summing up price appreciations and rental yields

• We covered both apartments and detached units differently with detached units referring to stand-alone houses such as
townhouses, mansionettes and bungalows, and apartments referring to a self-contained housing units occupying part
of a building, also called flats

• In our sub-markets analysis, we classified the various node areas in the Nairobi Metropolitan Area into three segments:
i.High End Income Segment – Consists of prime suburbs in Nairobi, such as Karen, Runda and Kitisuru. The
majority of these areas have been designated for low-rise residential construction and are distinguished by their large,
luxurious villas and bungalows

ii. Upper Middle Income Segment – Consists of suburbs such as Parklands, Westlands, Upperhill, Loresho,
Ridgeways among others. The population in these zones are majorly upper middle class with higher incomes than
the average characterization of middle class. They are zones for both high rise and low density houses

iii.Lower Middle Income Segment – Consists of suburbs in Nairobi habited by middle class such as Ruiru, Kikuyu,
Ruaka, Dagoretti, Upper Kabete (Uthiru and parts of Mountain View), and Ngong Road (Race Course, Lenana,
Corner), among others

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 Market Performance Summary
Average total returns improved in FY’2022/23 averaging at 6.2%, 0.4% higher than FY'2021/22 which
recorded 5.8%, on account of improved price appreciation
Cytonn Report: Residential Market Performance Summary: FY’2022/23 - FY’2021/22 Comparison
Average of Average of Average of Average of Average of Average of y/y y/y change y/y change
change
Rental Price Total Rental Price Total in Price in Total
Segment in Rental Appreciation Returns (%
Yield Appreciation Returns Yield Appreciation Returns
Yield
FY'2022/23 FY'2022/23 FY'2022/23 FY'2021/22 FY'2021/22 FY'2021/22 (% Points) (% Points) Points)
High End 4.4% 1.3% 5.7% 4.1% 1.5% 5.6% 0.4% (0.2%) 0.2%
Upper Middle 4.5% 1.1% 5.6% 4.5% 0.9% 5.4% 0.0% 0.2% 0.2%
Lower Middle 5.0% 1.0% 6.0% 5.0% 0.8% 5.8% 0.0% 0.2% 0.2%
Detached Average 4.7% 1.1% 5.8% 4.5% 1.1% 5.6% 0.2% 0.0% 0.2%
Upper Mid-End 5.4% 0.5% 5.9% 5.3% 0.3% 5.6% 0.1% 0.2% 0.3%
Lower Mid-End
5.4% 1.0% 6.4% 5.4% 0.4% 5.8% 0.0% 0.6% 0.6%
Suburbs
Lower Mid-End
5.5% 1.4% 6.8% 5.4% 1.3% 6.7% 0.1% 0.1% 0.1%
Satellite Towns
Apartments Average 5.5% 1.0% 6.5% 5.3% 0.7% 6.0% 0.2% 0.3% 0.5%
Residential Market
5.1% 1.1% 6.2% 4.9% 0.9% 5.8% 0.2% 0.2% 0.4%
Average

• Average total returns improved in FY’2022/23 to 6.2%, a 0.4%-points increase from 5.8% recorded in FY'2021/22
• Residential average y/y price appreciation came in at 1.1%, 0.2% points higher compared to a price appreciation of 0.9%
recorded in FY'2021/22. The average rental yield recorded a 0.2%-points increase to 5.1% from 4.9% in FY'2021/22 due
to increased rental rates supported by improved property prices

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I. Detached Units Performance
 Detached Units: High-End
Average price appreciation came in at 1.3%, with Rosslyn being the best performing node with an
average total return of 6.5%
Cytonn Report: High End Market Performance FY’2022/23 – FY’2021/22
Average of Average of Average of
Average of Average of Average of Average of Average of
Annual Price Price
Area Occupancy Rental Yield Total Returns Rental Yield Total Returns
Uptake Appreciation Appreciation
FY’2022/23 FY’2022/23 FY’2022/23 FY’2021/22 FY’2021/22
FY’2022/23 FY’2022/23 FY’2021/22
Rosslyn 90.0% 15.0% 5.0% 1.5% 6.5% 4.7% 2.8% 7.5%
Kitisuru 96.0% 11.8% 4.8% 1.6% 6.4% 4.2% 1.2% 5.4%
Karen 83.3% 12.7% 3.8% 1.7% 5.5% 3.7% 2.0% 5.7%
Runda 96.8% 10.1% 4.6% 0.7% 5.3% 4.1% 0.3% 4.4%
Lower Kabete 95.3% 13.1% 3.9% 1.1% 5.0% 3.6% 1.2% 4.8%
Average 92.3% 12.5% 4.4% 1.3% 5.7% 4.1% 1.5% 5.6%

• Detached units in the high end areas offered an average rental yield of 4.4% and price appreciation of 1.3% bringing the
total returns to 5.7%, with Rosslyn offering the highest returns at 6.5% while Lower Kabete offered the lowest total return
at 5.0%. Rosslyn continues to remain a preference to high income earners due to its proximity to malls as Two Rivers Mall,
Rosslyn Riviera Mall, and, Village market, amenities such Rosslyn Academy and infrastructure such as the Northern bypass
• Runda recorded the lowest average y/y price appreciation of 0.7% attributed to the relatively low uptake which came in
at 10.1%, 2.4% points lower than the high-end detached market average of 12.5% attributed to reduced demand for units
within in the area. However, the appreciation recorded a 0.4% improvement from 0.3% recorded in FY’2021/22

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 Detached Units: Upper Middle
The average price appreciation for detached units in the upper mid-end segment came in at 1.1%,
with Redhill recording the highest total return to investors at 6.4%
Cytonn Report: Upper Middle Market Performance FY’2022/23 – FY’2021/22
Average of Average of Average of
Average of Average of Average of Average of Average of
Annual Price Price
Area Occupancy Rental Yield Total Returns Rental Yield Total Returns
Uptake Appreciation Appreciation
FY’2022/23 FY’2022/23 FY’2022/23 FY’2021/22 FY’2021/22
FY’2022/23 FY’2022/23 FY’2021/22
Redhill & Sigona 84.6% 14.4% 4.9% 1.5% 6.4% 4.7% 1.7% 6.4%
Ridgeways 76.1% 12.8% 4.7% 1.6% 6.3% 5.0% 1.1% 6.1%
Runda Mumwe 90.8% 13.6% 5.2% 0.8% 6.0% 5.1% 0.6% 5.7%
Loresho 80.7% 14.2% 4.8% 1.1% 5.9% 4.9% 0.3% 5.2%
South B/C 88.5% 12.6% 4.3% 1.3% 5.6% 4.2% 1.1% 5.3%
Lavington 87.0% 12.7% 4.0% 0.6% 4.6% 4.0% 0.5% 4.5%
Langata 88.8% 10.7% 3.8% 0.7% 4.5% 3.8% 1.0% 4.8%
Average 85.2% 13.0% 4.5% 1.1% 5.6% 4.5% 0.9% 5.4%
• The upper middle segment recorded an average total return of 5.6% with a rental yield of 4.5% and 1.1% y/y price
appreciation in FY’2022/23
• Redhill and Sigona remained the best performing node in the segment with an average total return of 6.4% attributed to
the relatively high average rental yield and y/y price appreciation which came in at 4.9% and 1.5% respectively, 0.4%
points and 0.4%-points higher than the upper middle segment market average of 4.5% and 1.1%, respectively
• Langata was the least performing node in the segment with an average total return of 4.5%, 1.1%-points lower than
the segment’s market average of 5.6%

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 Detached Units: Lower Mid-End
Detached units in the lower mid-end segment performed the best recording an average total
return of 6.0% with Ruiru and Juja being the highest with 7.8% and 6.9% respectively
Cytonn Report: Lower Middle Market Performance FY’2022/23 – FY’2021/22
Average of Average of Average of Average of Average of
Average of Average of Average of
Annual Price Total Price Total
Area Occupancy Rental Yield Rental Yield
Uptake Appreciation Returns Appreciation Returns
FY’2022/23 FY’2022/23 FY’2021/22
FY’2022/23 FY’2022/23 FY’2022/23 FY’2021/22 FY’2021/22
Ruiru 87.3% 18.2% 6.2% 1.6% 7.8% 5.9% 1.9% 7.8%
Juja 81.4% 18.2% 5.7% 1.2% 6.9% 5.5% 1.2% 6.7%
Ngong 93.6% 12.4% 6.2% 0.4% 6.6% 6.5% (0.2%) 6.3%
Kitengela 76.7% 13.7% 4.9% 1.4% 6.3% 4.9% 1.4% 6.3%
Syokimau/Mlolongo 91.3% 18.3% 4.4% 1.5% 5.9% 4.5% 1.5% 6.0%
Athi River 86.2% 13.4% 4.3% 1.1% 5.4% 4.3% 1.6% 5.9%
Rongai 98.8% 16.7% 4.1% 1.2% 5.3% 4.0% 1.1% 5.1%
Thika 83.3% 13.7% 5.0% 0.2% 5.2% 5.3% (0.5%) 4.8%
Donholm & Komarock 85.0% 13.1% 4.5% 0.3% 4.8% 4.3% (1.0%) 3.3%
Average 87.1% 15.3% 5.0% 1.0% 6.0% 5.0% 0.8% 5.8%
• Detached units in the lower middle segment performed the best recording an average total return of 6.0% with Ruiru
and Juja being the highest with 7.8% and 6.9% respectively attributed to their relatively high rental yield averaging 6.2%
and 5.7%, respectively and y/y price appreciation which came in at 1.6% and 1.2% respectively, 0.6% and 0.2% points
higher than the lower middle segment’s market average of 1.0%
• Ruiru and Juja’s performance is attributed to being some of the fastest growing satellite towns that are commercially
attractive hence attracting residents making them attractive for investment

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II. Apartments Performance
 Apartments: Upper Mid-End
Rental yields remained attractive in the upper mid-end segment averaging at 5.4% with the
price appreciation coming at 0.5%
Cytonn Report: Upper Mid-End Market Performance FY’2022/23 – FY’2021/22
Average of Average of Average of Average of
Average of Average of Average of Average of
Annual Price Price Total
Area Occupancy Rental Yield Total Returns Rental Yield
Uptake Appreciation Appreciation Returns
FY’2022/23 FY’2022/23 FY’2022/23 FY’2021/22
FY’2022/23 FY’2022/23 FY’2021/22 FY’2021/22
Westlands 83.1% 24.5% 5.9% 0.5% 6.4% 5.9% 0.1% 6.0%
Kilimani 84.4% 21.1% 5.8% 0.2% 6.0% 5.5% 0.4% 5.9%
Kileleshwa 85.0% 14.8% 5.5% 0.3% 5.8% 5.5% 0.4% 5.9%
Loresho 88.0% 10.4% 4.7% 1.1% 5.8% 4.7% 1.2% 5.9%
Upperhill 81.5% 10.6% 5.0% 0.7% 5.7% 5.1% (1.1%) 4.0%
Parklands 83.8% 13.6% 5.2% 0.4% 5.6% 4.8% 1.0% 5.8%
Average 84.3% 15.8% 5.4% 0.5% 5.9% 5.3% 0.3% 5.6%
• The upper mid-end segment recorded an average total return of 5.9% with a relatively high average rental yield of 5.4%
and price appreciation of 0.5% with most markets recording price appreciations attributed to improved property
transactions by the growing middle class.

• Westlands was the best performing node with an average total return of 6.4% attributed to its relatively high rental
yield of 5.9%, 0.5% points higher than the upper mid-end market average of 5.4%. The subsequent completion of the
Nairobi Expressway, presence of amenities, and vibrant commercial activities continues to support uptick in rental rates
• Parklands was the lowest performing node with a price appreciation of 0.4% which brought its average total return to
5.6%, 0.3% points lower than upper mid-end the segment’s market average of 5.9%

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 Apartments: Lower Mid-End Suburbs
Apartments in the lower mid-end suburbs recorded an average total return of 6.4% with an
average y/y average price appreciation of 1.0%
Cytonn Report: Lower Mid-End Suburbs Market Performance FY’2022/23 – FY’2021/22
Average of Average of Average of Average of
Average of Average of Average of Average of
Annual Price Price Total
Area Occupancy Rental Yield Total Returns Rental Yield
Uptake Appreciation Appreciation Returns
FY’2022/23 FY’2022/23 FY’2022/23 FY’2021/22
FY’2022/23 FY’2022/23 FY’2021/22 FY’2021/22
Waiyaki Way 83.8% 21.2% 6.3% 1.1% 7.4% 6.2% 1.1% 7.3%
South C 83.8% 17.0% 6.2% 0.9% 7.1% 6.1% 0.4% 6.5%
Imara Daima 86.1% 11.7% 5.3% 1.5% 6.8% 5.2% 1.2% 6.4%
Dagoretti 88.6% 14.9% 5.8% 0.8% 6.6% 5.9% 0.1% 6.0%
Donholm & Komarock 92.1% 12.9% 5.7% 0.6% 6.3% 5.8% 0.1% 5.9%
Kahawa West 89.0% 9.8% 5.0% 1.2% 6.2% 5.2% 0.6% 5.8%
Race Course/Lenana 81.4% 19.1% 5.5% 0.4% 5.9% 5.9% (0.1%) 5.8%
Langata 82.0% 12.4% 4.4% 1.5% 5.9% 4.5% (0.6%) 3.9%
South B 85.9% 15.4% 4.4% 1.3% 5.7% 4.2% 0.2% 4.4%
Average 85.9% 14.9% 5.4% 1.0% 6.4% 5.4% 0.4% 5.8%

• Apartments in lower mid-end suburbs recorded an average total return of 6.4% with an average y/y average price
appreciation of 1.0%. This was an increase in performance compared to a total return of 5.8% in FY’2021/22 attributed
to a 0.6% points increase in price appreciation from 0.4% in FY’2021/22

• Waiyaki way was the best performing node with an average total return of 7.4%, attributed to the completion of
Nairobi Expressway and it’s proximity to more well-off neighborhoods which has driven up property transactions that
brought the average rental yield to 6.3%

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 Apartments: Lower Mid-End Satellite Towns
Satellite towns registered the highest average total returns in the apartments market, coming in
at 6.8% driven by demand for renting units in satellite towns due to their affordability
Cytonn Report: Lower Mid-End Satellite Towns Market Performance FY’2022/23 – FY’2021/22
Average of Average of Average of
Average of Average of Average of Average of Average of
Annual Price Price
Area Occupancy Rental Yield Total Returns Rental Yield Total Returns
Uptake Appreciation Appreciation
FY’2022/23 FY’2022/23 FY’2022/23 FY’2021/22 FY’2021/22
FY’2022/23 FY’2022/23 FY’2021/22
Ruaka 78.6% 22.3% 5.2% 2.3% 7.5% 5.2% 2.2% 7.4%
Ruiru 87.0% 17.1% 5.8% 1.6% 7.4% 5.6% 1.4% 7.0%
Ngong 83.1% 14.0% 5.5% 1.7% 7.2% 5.6% 1.6% 7.2%
Kikuyu 82.8% 17.6% 5.0% 2.0% 7.0% 5.2% 2.1% 7.3%
Athi River 86.8% 16.0% 5.6% 1.3% 6.9% 5.5% 1.2% 6.7%
Syokimau 85.5% 12.0% 5.3% 1.4% 6.7% 5.0% 1.6% 6.6%
Thindigua 90.0% 21.1% 5.4% 1.1% 6.5% 5.4% 2.2% 7.6%
Rongai 89.2% 16.8% 6.0% 0.3% 6.3% 5.8% (0.1%) 5.7%
Kitengela 85.9% 10.3% 5.3% 0.7% 6.0% 4.9% 0.1% 5.0%
Average 85.4% 16.4% 5.5% 1.4% 6.8% 5.4% 1.3% 6.7%
• Satellite towns recorded the highest average total return at 6.8% attributed to the relatively high average y/y price
appreciation of 1.4% with a rental yield of 5.5%. Demand for units in the segment continued to be driven by relative
affordability of housing units and preference of rental rates in Satellite towns

• Ruaka was the best performing node with an average total return od 7.5% attributed to its relatively high average price
appreciation of 2.3%, 0.9% points higher than the segment’s market average of 1.4%. Kitengela recorded the lowest
performance with an average total return of 6.0%, 0.8%-points lower than the satellite towns average of 6.8%

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D. Conclusion and Outlook
Conclusion and Outlook
Of the key metrics we used to measure performance, our outlook for housing demand is
positive while we have a negative outlook for purchasing power
2022 2023
Factor FY’2022/23 Experience and Outlook Going Forward
Outlook Outlook
• Kenya has relatively high urbanization and population growth rates averaging 3.7% and 1.9%
compared to the global averages of 1.6% and 0.9%, respectively, according to the World Bank as
of 2021. This will continue to provide sustained demand for more housing units in the country
Housing • The Centre for Affordable Housing Finance Africa (CAHF) estimates that Kenya has an 80.0% Positive Positive
Demand annual housing deficit, as only about 50,000 new houses are delivered each year against a
demand for 250,000 units per year hence the demand outstripping supply at an average of
200,000 houses supplied every year

• In 2023, the government is prioritizing the completion of previously stalled projects and
avoiding initiation of new expensive projects amid the current regime’s promised spending cuts.
Consequently, we expect the sourcing of funding for infrastructure projects in the country to
Infrastructure further shift to alternative financing strategies such as; Public-Private Partnerships (PPPs), Positive Negative
issuing of infrastructure bonds, joint ventures, and, grants and concessional loans from more
foreign organizations, in order for the government to fast-track the infrastructural development
that is critical in growing the Kenyan economy

• The reduced purchasing power among buyers amid the tough economic environment brought
about by inflationary pressures on the back of a weakened shilling against the dollar is expected
Purchasing to further hamper the purchasing power of buyers. This is as prices of essential items continue
Power to soar, thereby leading to slow uptakes of residential units consequently affecting the Negative Negative
residential performance. However, we expect the growing middle class to pivot demand for
residential units

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 Conclusion and Outlook
Our general market outlook for the residential sector in 2023 is NEUTRAL
2022 2023
Factor FY’2022/23 Experience and Outlook Going Forward
Outlook Outlook
• The provision of affordable mortgage loans through Kenya Mortgage Refinance Company (KMRC), is
expected to gradually grow the local mortgage market and increase home ownership
• Currently, KMRC is the sole institution licensed to carry out Mortgage Liquidity Facility (MLF)
activities in Kenya, which include provision of long-term funds to Primary Mortgage Lenders (PMLs)
Access to credit
such as banks, microfinance institutions and SACCOs Negative Neutral
• In 2022, KMRC refinanced 1,948 mortgage loans valued at Kshs 6.8 bn, which was a 278.0% increase
from 574 home loans disbursed in 2021 valued at Kshs 1.3 bn. Despite the increase, the numbers
remain low at 7.3% of the total number of mortgage loans which stood at 26,723 accounts valued at
Kshs 245.1 bn as at 2021. The graph below shows the number of mortgage loan accounts in Kenya

• The residential sector recorded an improvement in investor returns to 6.2% in FY’2022/23, from
5.8% in FY’2021/22 owing to increased selling prices and rents which came in at Kshs 119,609 and
Performance Kshs 540, respectively, from Kshs 118,652 and Kshs 535, respectively, recorded in FY’2021/22
• We expect investors to focus on lower satellite towns which offer relatively affordable land and Neutral Neutral
relatively high total returns for detached houses, which came in at 6.0% in FY’2022/23, 0.2%
points higher than the detached market average of 5.8%. Apartments in satellite towns recorded
an average return of 6.9%, 0.7% points higher than the apartments market average of 6.2%

• Given the positive outlook on demand, a negative outlook on purchasing power, and neutral outlooks on
Market infrastructure, access to credit, and performance, our general market outlook for the residential sector in 2023 is
Outlook & NEUTRAL. For detached units, investment opportunity lies in areas such as Ruiru, Juja, and Ngong, while for
Investment apartments, investment opportunity lies in Ruaka, Waiyaki Way, and Ruiru driven by the current performance in
Opportunity terms of returns to investors

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 Thank You!
For More Information, please see below our contact details:

a) Free Market Research: www.cytonnreport.com

b) Follow on Twitter: @CytonnInvest

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d) Email Address: [email protected]

e) Phone Number: +254 748 070 000

Disclaimer: The views expressed in this publication are those of the writers where particulars are not warranted. This publication is
meant for general information only and is not a warranty, representation, advice, or solicitation of any nature. Readers are advised
in all circumstances are encouraged to assess the relevance, accuracy and completeness of the information of this publication.

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