The Housing Bubble in Kenya

It is often said that housing/land prices in Kenya always go up and can never go down. You just cannot fail if you invest in real estate in Kenya. But is this really so?

According to The Standard, a report by the Central Bank of Kenya and the World Bank indicates that only 1 in 10 Kenyans can afford to buy the home they live in, even if they get a mortgage (assuming they even qualify to get it).

I think the question must be posed: What is a bubble? According to Wikipedia, An economic bubble (sometimes referred to as a speculative bubble, a market bubble, a price bubble, a financial bubble, a speculative mania or a balloon) is “trade in high volumes at prices that are considerably at variance with intrinsic values”. It could also be described as a trade in products or assets with inflated values.

Specifically regarding housing/real estate bubbles, Wikipedia further says: A real estate bubble or property bubble (or housing bubble for residential markets) is a type of economic bubble that occurs periodically in local or global real estate markets. It is characterized by rapid increases in valuations of real property such as housing until they reach unsustainable levels relative to incomes and other economic elements, followed by a reduction in price levels.

Now, back to the Central Bank report. Here are a few selected excerpts from the report:

  • only eight per cent of Kenyans — 320, 000 households — can afford a mortgage was shocking
  • for one to buy a house worth Sh2 million, for example, one must have a net salary of Sh100,000, and service the loan at Sh42,000 a month for a period of 15 years at an interest rate of 14.5 per cent. Those earning less have no place in the mortgage industry and must find another way of owning their dream house
  • The shocking revelations also indicate that the total mortgage loan book in the country is only 16,000 accounts, while the total value of mortgage loans, as at the end of December last year was Sh133.6 billion. This means that, technically, only 16,000 people/organisations in the whole of Kenya have taken up mortgages
  • It is also an indication that buying property in Kenya is predominantly for the rich, who opt for cash sales as opposed to mortgages.
  • Professionals in the housing sector say the findings reflect the high level of speculation on land that has pushed property prices through the roof

Only 1 in 10 Kenyans can afford to buy the home that they live in, and even fewer Kenyan can afford to take up mortgages. In my mind, this report clearly indicates that the Kenyan real estate market is in the middle of a bubble. Real estate prices have gotten to be so high that the great majority of Kenyans just cannot afford real estate.

Sooner or later, this bubble will burst and prices will come crashing down. Many of the “me too” real estate developers and investors will lose vast sums of money. It is just a matter of time…

Additional Resources


  1. A piece of advice – Wikipedia is not a valid ‘source.’ It is public edited content and cannot form part of any published report. Do not use it as a basis to form an argument. Use accredited academic journals such as The Journal of Economics, Harvard Business Review etc etc..
    Secondly – althought I am no expert on propert bubbles, it is most likely that the real estate developers and early investors are the ones who stand to gain – and the consumer (Kenyan Homeowners) and banks, as well as the government if it is forced to intervene, that will suffer. A mortgage taken on a house implies that the mortgage payment is made to the developer of seller of the house, and the only two remaining are the homeowner (borrower) and the bank (lender) and if one or the other fail to honor the terms of the mortgage, both will suffer.

  2. has anyone watched the film – “Inside Job”?

  3. I haven’t. What is it about?

  4. Annonymous says:

    This article appears to have flaws. Firstly, 8% of the population is 3.2 million rather than 320,000. Secondly, I think the number of individuals that are now getting mortgages from the banks are increasing. Their salary levels are also increasing. This will have a positive impact towards the demand of new homes. Also, the fact that today lesser people own homes should be viewed as a good thing. This means that there will be higher demand to fullfil the housing needs of these potential new homeowners.

    I believe in the growing middle class of Kenya and strongly believe that the people there need homes and their ability to get homes has started to change drastically over the last few years. Additionally, there is a strong belief that the elections next year will be very stable. The international community is eyeing Kenya very closely as it is the gateway to the East Africa. It is also my belief that after the elections the prices of the real estate will further go up because there will be lot of influx of businesses and multi-nationals into this country, thereby very positively impacting the increase in the jobs, which obviously has a pretty direct impact on the real estate needs.

  5. The prices aint going down any time soon, look at OIL… Once a producer discover can pay more they never budge

  6. Ekatarina is a tikitator says:

    This is where the bubble is guys “higher education” . Peter Thiel (Paypal Founder): We’re in a Bubble and It’s Not the Internet. It’s Higher Education.

  7. christian says:

    there has been a housing bubble in many countries around the world fueled by cheap loans. Most places the housing bubble has already burst and so it will also in kenya, whether prices will fall or just remain the same for the next 20 years will remain to be seen. But everything has an end.

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