How to redress Kenya’s expensive property prices

By Amos Kinuthia

Why are property prices so ludicrously expensive when we have an abundance of land and building materials? Are realty owners trying to rip people off or is there some realistic reason that the prices are so unaffordable, other than burgeoning population and therefore demand?

First, I could blame Maina Kageni’s glibness. With all that is horribly wrong with Maina’s raunchy breakfast topics, there is one thing Maina does impeccably well, radio advertising and particularly real estate hyping. This man will be a successful ice seller to an Eskimo. Maina has a ready audience and his over the top spruiking have as a result perpetuated the notion that prime plots are soon going be a thing of the past.

If you didn’t buy yesterday, buy today or brace yourself for what is to come or not come. The promise that developers would be willing to buy the land at much higher prices when the standard gauge railway is complete or when the
government embarks on infrastructure and urban development is an appetizing one. The value of this land is purely pegged on the value of its proximity to upcoming centers of economic activity.

Secondly, I lay the blame squarely on our colonial and post colonial masters. Post colonial allocation of land left most of the population with little or no land and the fact that consequent generations have chosen to speculatively ‘land bank’ and hoard viable urban land has only served to rally property prices.

Non entrepreneurial culture among the populace has left land and housing as the main lines of investments for the common and the ‘uncommon’ folk. The misplaced belief that real estate tramples all other forms of investments among the growing middle class is untrue: Silicon Valley ventures have proved this a falsehood. As long as this present mindsets prevails and young minds veer off investing in business ventures or any productive value­ adding engagements, land prices will continue up.

Wages have not kept pace with the general rate of inflation, and burgeoning property prices have moved at an even faster pace. The unbridgeable gap between falling wages and prices is further made worse by the fact that, first ­time and low ­paid purchasers are competing against buy ­to ­let landlords with deep pockets and fat bank accounts.

That being said, land can be scarce for simple reason that they don’t make it anymore and if I remember anything from my economics classes, scarcity fuels demand and prices soar when demand outstrips supply. Real estate prices have risen considerably in the past few years and most of us workers have been priced out of a house or land and if we use the past trends to envisage future drift, I can see no sign of halting.

Depressing right? But there is something else I learnt from economics, that demand can’t always outrun supply, even with a finite resource like land. The fact is: unprecedented assurgency in prices always halt when demand plunges. But demand will not fall you say. Well maybe not in your lifetime or mine.

Current world population stands at 7.1 billion and will peak at 9.5 billion by 2050. What this means is that overall demand for outstretched resources like land and other limited resources will grow by say 35 percent, that is if we assume population growth will wholly translate to demand.

We will see further population rises in developing countries plagued by increasing birthrates but developed countries are all at or near replacement levels. This therefore means that developing countries property prices will remain on the up in main town that offer better economic and social opportunities.

What is the solution for this problem you ask? I will tell you: use it or lose, land value taxes and work-from-home arrangements.

Use it or lose it

Homes and land cost an awful lot in many places in Britain, a situation prevalent all over the world and prospective home owners are finding it overwhelmingly impossible to be participants in this competitive real estate market. House prices in Britain according to an article printed in The Guardian average sh44 million. In an effort to provide panacea to the developing housing crisis, former UK Labour leader, Ed Miliband proposed that all developers be forced to cease land banking and hoarding in UK major cities and their outskirts.

A ‘use it or lose it’ policy for all land idle, while divisive and polarizing, will act to discourage land hoarders and therefore work to improve supply. That is if you consider supply as the willingness and not the availability and or the abundance. Am not advocating private land to be repossessed but a policy to discourage excessive holding for speculative reasons should be in place and I see no reason why this should not work here.

Land value taxes

The existing land rates framework is largely pegged on land sizes and loosely on land value. The associated taxes are therefore unbelievably low as valuation of land is rarely done by the involved authorities. This framework should be revised with more punitive taxes to end our obsession with property speculation. Further, revised taxes on gross gains made from property speculation can serve to bridge the widening national budget deficit.

Tele-working or work-from-home

Agglomeration (The act or process of collecting in a mass; a heaping together) is primarily tied to growing social and economic opportunities. The populace appetite for properties close to the cities is therefore as a result of need to be close to their places of work. In this age of telecommunication, the need for employees to be physically present at the work place should be minimal if companies could adopt a tele-working or work-from-home model. Such arrangements would do a great extent reduce the penchant to live next to cities and consequently the demand for property.


  1. This is very great piece Dhahabu, systemic shifts in market forces will arrest this issue, agglomeration is one way, though its not a prophylactic. Market forces will sort this


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