‘Mortgages are unaffordable’ in Nairobi Metropolitan area housing markets
By David Indeje On September 11, 2017
Owning a home is becoming an increasingly unaffordable proposition in many areas within the Nairobi Metropolitan Area due to the high prices of houses and cost of debt to service a mortgage. “The Nairobi metropolitan Areas remains a renters market with rents being affordable and mortgages Unaffordable,” according to Cytonn Investments Nairobi Metropolitan Mortgage and Rental Affordability Report 2017.
According to Cytonn, this is despite the government’s efforts to increase the affordability of houses through measure such as Capping the interest rates, giving developers constructing more than 100 units p.a a tax cut of 15 percent, and removing NEMA, NCA and title search fees. “The ineffectiveness can be attributed to low incomes levels that cannot service a mortgage, high property prices which keep on rising and low mortgage disbursements by banks following the implementation of the Banking Amendment Act 2015.” Mortgages were unaffordable in most estates with the Nairobi metropolitan area having an index of 65, a 1 index point decline from 2016 where on average the Nairobi Metropolitan Area had an index of 66.
According to the report, similar to 2016, in 2017, Satellite towns had the highest Mortgage affordability index at 82, with the most affordable towns being for both renting and buying being Athi River, Kitengela, Ruaka, Kiambu, Thindigua, Rongai, Komarock , Juja ,Ngong, Donholm, Thika and Kikuyu, which were also the most affordable in 2016 in addition to Githurai and Kariobangi which were not sampled in 2017 due to low sales volumes.
“In 2017, The Nairobi Metropolitan area had a rental affordability index of 124, an 8 index points decline from 2016 where the market had an average rental affordability index of 132 attributable to an average rental appreciation of 5.3 percent witnessed in the market in 2017,” reads part of the report which was carried out a research on house rents and prices across 35 submarkets in the Nairobi Metropolitan area – This is in Nairobi and 32,000 square kilometres surrounding it.