Kisumu Records Lower Rental Yields Compared to Other Towns

Across all real estate sectors, Kisumu real estate recorded average rental yields of 7.2 percent, which is lower than Nyeri, Mombasa and Nairobi Counties.

This is according to the weekly report by Cytonn Investments which noted that the average rental yields for Kisumu were lower than Nyeri, Mombasa and Nairobi were by 1.4 percent points, 1.2 percent points, and 0.9 percent points, respectively, and 2.0 percent points higher than Nakuru County.

The residential sector in Kisumu recorded average rental yields of 5.1 percent, higher than Nakuru and Nyeri which recorded average rental yields of 3.9 percent and 6.1 percent, respectively, and lower than Mombasa and Nairobi with average rental yields of 6.0 percent and 5.4 percent, respectively.

For the commercial office sector, the report stated that Kisumu has average rental yields of 7.0 percent, higher than Nakuru Town, which has average rental yields of 5.6 percent, and lower than Mombasa, Nairobi, and Nyeri, which have average rental yields of 9.2 percent, 9.3 percent, and 13.0 percent respectively.

In the retail sector, Kisumu recorded average rental yields of 9.4 percent, outperforming Nakuru with 6.1 percent, but lower than Mombasa and Nairobi which have an average rental yield of 10.0 percent and 9.7 percent respectively.

Below is a summary of the analysis;

The main factors driving the real estate market in Kisumu include:

Positive Economic Growth

Kisumu County ranks as the 17th richest county in Kenya with a GDP per Capita of USD 625, against a Kenyan average of USD 634 according to a 2015 survey by World Bank. This is boosted by tourism, trade, and commerce, as well as agriculture, hence increasing the disposable income and boosting demand for real estate products in Kisumu City.

Devolution 

Devolution has opened up Kisumu City, attracting government institutions, private investors, and entrepreneurs to the county headquarters.

Positive Demographics

Kisumu City has a growing population, both organic and from immigration. The population has been growing at a rate of 2.8 percent p. a, compared to the Kenya average of 2.6 percent p.a.

Infrastructural Development

Kisumu City has seen a lot of infrastructural developments in the recent years, which have opened it up for development.

However, despite all the factors supporting the real estate sector in Kisumu, there are still a number of factors, which if not properly addressed will present challenges to real estate development in the county, and these include:

Unstructured Planning Regulations

The city is poorly planned and is based on a Town Plan developed in 1974. There is little clarity on policies guiding the planning; in the past, expansion of roads led to a disruption of sewer and water lines in the city.

Lack of Space for Expansion

As a result of the poor planning, residential developments in areas such as Milimani are close to the city center and hence the city’s commercial hub cannot expand outwards.

Poor Land Administration

According to the Agricultural Sector Development Support Program (ASDSP), only 63 percent of the land parcels in Kisumu actually have title deeds and many buyers have been conned off land or settled in land parcels belonging to other people, and hence landowners are losing their property. This is a trend that has also made investors wary of investments in the city, and,

Political Instability and Intolerance

In times of political instability, property destruction has resulted in large losses. This discourages investments in the real estate sector by investors for fear of destruction, in times of violence