You will agree with me that there is no more significant purchase an ordinary person will make than that of a house. Talk of personal cars or land, nothing exceeds the buying price of a home. But why is it so? Why are houses so expensive?
Well, in this post, you'll know the reason behind the tremendous price of houses.
Over the decades, homes have been a bit cheaper compared to current times. So, what has happened over the last decades that has made houses very costly?
Prices of single homes have greatly increased over the years. If you want to be a homeowner, you should have a lot of money to make your dream real. If you are not buying cash, you can find an affordable mortgage that you'll pay between 15 and 30 years.
Factors Leading to Costly Houses in Kenya
Skyrocketing population growth
Over the years, the Kenyan population has been increasing rapidly. As a result, most people move to urban centres in search of jobs and greener pastures, and they must rent or buy residential houses.
Since demand for housing is increasing, the builders are also growing, but at a lower rate than population growth. That's why you will find that buying a house is so expensive nowadays.
When building a house, whether residential or for commercial use, there are several documents you must sign and adhere to several state rules.
As a result, more people tend to avoid all the processes by just investing in other things like cryptocurrency. Therefore, that reduces the number of houses, given that the population grows daily.
Afterwards, the available real estate investors raise their house selling prices because the demand will always be there.
Increased land price
As you all know, the land is an appreciating asset, but the building itself depreciates as years go by, though it may take centuries if well maintained.
The land is an appreciating asset, and prices grow every time. As a result, those seeking land to build houses for sale will have to go deeper into their pockets. And that will result in an increased price of the completed home so that they can gain their profits.
Increase in construction costs
We've seen the price of construction materials increase over the years, with the most increase recorded after the Covid-19 global pandemic. The imported materials had to come to a standstill/ decrease at some point because of international travel restrictions in fear of spreading the pandemic.
That led to a higher scarcity of materials, increasing the prices of the available ones. Once the cost of the materials increased, the investors had to increase the house prices to maintain their profits.
Brokers have exaggerated house prices
Nowadays, it's rare to buy a house without the involvement of an intermediary broker. The brokers liaise with the actual investors to sell the houses on their behalf. Once there is an agreement, the broker gets their share of income, and the owner gets their share too.
As a result, you'll find that the house is more expensive than if you could have bought the house from the original owner.
High advertising costs
TV channels charge real estate investors millions of money to place adverts on the screen. The more they want their advert to reach more people(depending on most watched programmes), the more they'll pay.
Alternatively, if homeowners use public figures and affiliates for marketing their houses, they'll still pay high advertising costs.
So, the final price of the houses will be high.
No one has forgotten how houses and people's businesses got affected during Kenya's 2007/2008 political saga.
Many people went bankrupt then after losing their most significant source of income.
It's now over a decade, but investors are freaking out about investing in building houses in big towns. As a result, the demand for homes is growing, and the investors are few.
So, the available houses are sold at a very high price.
Low-interest rates of mortgages
The average interest rate of mortgages in Kenya is 10.9%, which is not that high. People with stable incomes have sought to own their homes since they can manage to repay the mortgage.
That increases the overall demand for houses. Hence, the home sellers increase the prices to achieve more out of their property.
The Bottom Line
Owning a home sounds good, but the cost involved pushes many away. That's why you need to consider several factors before you get a mortgage.
You can consider investing in real estate that will bring profits instead of buying an expensive home. Actually, you can retire at 40 with real estate investment. In some instances, a costly house is just a liability.
Frequently Asked Questions
How much is an average house in Kenya?
An average home of 1 to 3 bedrooms is around Ksh. 15 million. While 4 to 6 bedrooms can cost above Ksh. 40 million.
How much is a house in Nairobi?
Houses in Nairobi can be expensive, costing Ksh.87 million and above, with the most expensive costing around Ksh.650 million.
How much can it cost to build a two-bedroom house in Kenya?
Building a two-bedroom house in Kenya can cost between Ksh. 500,000 and Ksh. 1 million. But that range can go high if the price of construction materials keeps increasing.
Can I buy a house in Kenya as a foreigner?
Yes, you can own a home in Kenya as a foreigner under your name. The 2010 constitution grants anyone to own a home, although some restrictions are involved.