Nairobi’s Real Estate Surge in 2024: A Deep Dive into the 5.2% Property Price Increase

In 2024, Nairobi’s real estate market experienced a notable transformation, with property prices escalating by 5.2%. This growth rate is a significant leap from the 2.5% observed in 2023, underscoring a dynamic shift in the city’s housing landscape. A comprehensive survey by HassConsult, a prominent real estate firm, sheds light on the factors driving this change, particularly the heightened demand for standalone units amidst a dwindling supply compared to apartments.

Leading Suburbs in Property Appreciation

The survey highlights specific suburbs that have become hotspots for property appreciation. Juja, Ridgeways, and Loresho emerged as frontrunners, recording impressive house price growth rates of 12.9%, 12.5%, and 11.6% respectively in the year leading up to December 2024. These areas have become focal points for investors and homeowners alike, reflecting a broader trend in Nairobi’s evolving real estate market.

Detached Houses: A Scarce Commodity Driving Up Prices

Detached houses, often referred to as standalone units, have seen a remarkable price increase of 7.5% over the year. This surge outpaces the growth of apartments and semi-detached houses, which recorded price expansions of 1.6% and 0.8% respectively. The limited availability of detached houses is a primary factor contributing to their accelerated price growth. As of December 2024, detached houses constituted a mere 7.2% of the property market, in stark contrast to semi-detached units at 22.9% and apartments dominating at 69.9%.

Reflecting on the market composition a decade ago, detached units accounted for 32.7%, semi-detached units held 21.9%, and apartments made up 45.4%. This shift indicates a significant increase in apartment developments over the years, leading to an oversupply in that segment.

Sakina Hassanali, HassConsult’s Head of Development Consulting and Research, noted, “Detached units performed strongly due to their limited supply relative to other property types. In contrast, the increasing availability of multi-dweller units such as apartments has slowed their price growth.”

Current Market Valuations

By the end of December 2024, the average price of a property in Nairobi stood at KSh36.7 million. Breaking it down further, four to six-bedroom properties averaged KSh40.6 million, while one to three-bedroom properties were priced around KSh13 million. These figures provide a clear picture of the current market valuations, offering insights for potential buyers and investors.

Rental Market Dynamics

The rental market in Nairobi presented a contrasting narrative. In 2024, rental prices for all property types in the city experienced a marginal contraction of 0.02%, a stark difference from the 2.5% increase observed the previous year. This stagnation highlights landlords’ challenges in raising rents amidst prevailing economic conditions.

The subdued rental returns have, in turn, impacted the overall yield from property investments. When compared to other asset classes in the economy, such as government securities and equities, property returns for 2024, which encompass both capital gains and rental yields, remained lower. Yields stood at 7.2% in suburbs and 5% in satellite towns, whereas Treasury bill interest rates ranged between 9.5% and 11%.

Ms. Hassanali elaborated, “Despite these positive trends, property returns for 2024, comprising capital gains and rental yields, remained below returns from other asset classes.”

The average rental price for a property was KSh167,704 across the 14 suburbs and 10 satellite towns surveyed by HassConsult. Specifically, four to six-bedroom houses commanded asking prices of KSh237,107 on average, while one to three-bedroom properties had an asking price of KSh92,377.

Factors Influencing the Market Trends

Several elements have contributed to the observed trends in Nairobi’s property market:

Supply and Demand Dynamics: The limited supply of detached houses amidst a growing demand has naturally driven up their prices. Conversely, the oversupply of apartments has led to a deceleration in their price growth.
Economic Conditions: The broader economic environment plays a crucial role. Challenges such as inflation, interest rates, and overall economic growth influence both buyers’ purchasing power and landlords’ ability to adjust rental prices.
Investment Returns: Investors are continually assessing the returns from property investments relative to other asset classes. With property yields lagging behind instruments like Treasury bills, there might be a shift in investment preferences.

Conclusion: Exploring Opportunities in Nairobi’s Real Estate Market

The 2024 surge in Nairobi’s property prices, particularly in standalone units, underscores the city’s evolving real estate dynamics. For potential homeowners and investors, this presents both challenges and opportunities. While the limited supply of detached houses has driven up prices, the oversupply in the apartment segment may offer more affordable options.

As you consider your next move in this vibrant market, exploring current property listings can provide valuable insights into available opportunities. Whether you’re seeking a family home in a burgeoning suburb or an investment property with promising returns, Nairobi’s real estate landscape offers a diverse array of options to suit various preferences and objectives.