May 18, 2025

In 2024, we published the Nairobi Metropolitan Area Residential Report 2024 themed ‘Untapped Investment Niches’. This week, we update our previous research with the Nairobi Metropolitan Area (NMA) Residential Report 2025 titled ‘Navigating Opportunities in a Resilient Market’ by highlighting the residential sector's performance in the region in terms of price appreciation, rental yields, and market uptake, based on the coverage of 35 regions within the Nairobi Metropolis. We shall also discuss factors influencing residential supply and demand, current developments affecting the industry, and conclude with a look at investment options as well as the sector's general outlook for the coming fiscal year. As such, we shall discuss the following;

1. Overview of the Residential Sector,
2. Recent Developments in the Sector,
3. Residential Market Performance, and,
4. Conclusion, Residential Market Outlook, and Investment Opportunity.

Section I: Overview of the Residential Sector

In FY’2024/25, the residential sector maintained resilience despite economic challenges, supported by sustained demand from Kenya’s high urbanization rate of  3.8% p.a. and population growth 2.0% p.a. rates compared to the  global average of 1.7%p.a and 0.9% p.a, respectively, as per World Bank 2023 data. According to the Kenya National Bureau of Statistics (KNBS)2025 Economic Survey, the Real Estate sector’s contribution to GDP grew by 4.6% to KSh 283.1 bn in Q4’2024, up from KSh 270.5 bn in Q4’2023, contributing 10.0% to GDP a 0.3% decrease from 10.3% in Q4’2023. Cumulatively, Real Estate and construction sectors accounted for 15.6% of GDP, a 3.6% decline from 19.2% in Q4’2023, reflecting economic slowdown and reduced construction activity.

The residential sector recorded a slight downtrend in performance, with the average total returns to investors coming in at 5.8%, a 0.3%-point decline from 6.1% recorded in FY’2023. The performance was attributed to a decrease in the residential average y/y price appreciation which came in at 0.4% in FY’2024, 0.2%-points lower than the 0.6% appreciation recorded in FY’2023, driven by slowed property transactions during the year. However, we expect the sector’s contribution to continue improving in 2025 supported by;

1. Government and private sector aggressiveness in implementing housing initiative programs, which focus on affordable housing. As of 2024, the Affordable Housing Programme (AHP) advanced with 1,189 units completed and an estimated total of 730,062 housing units under construction by both the government and the private sector. This is according to the Architectural Association of Kenya (AAK’s) Status of the Built Environment Report 2024,
2. Continued efforts by the Kenya Mortgage Refinance Company (KMRC) to drive the availability and affordability of home loans to Kenyans by providing single-digit fixed rate, and long-term finance to Primary Mortgage Lenders (PMLs) such as banks and SACCOs. In FY’2023, KMRC had disbursed Kshs 9.6 bn to twelve participating PMLs (7 banks and 5 saccos),
3. Concerted efforts by the government to provide affordable mortgages through the Kenya Mortgage Refinance Company (KMRC), in a bid to make home ownership more accessible to Kenyans by providing long-term, low-interest home loans to potential home buyers. By December 2023, KMRC refinanced 3,128 mortgages for refinancing at a low interest rate of 5.0%, and,
4. The growing trend towards use of alternative financing for Real Estate development particularly Public-Private Partnerships (PPPs) like Lapfund Bellevue Park Residences, enhancing supply.

Going forward, we anticipate that the following factors will influence the performance of the residential sector;

1. Housing Deficit: The Center for Affordable Housing Finance Africa (CAHF) projected that Kenya's housing deficit reached 80.0% in 2024. This estimation arises from the annual delivery of approximately 50,000 new homes, falling significantly short of the demand, which amounts to 250,000 homes per year. Notably, the low-income segment faces substantial under-representation, receiving only 2% of the constructed residences. To bridge this disparity, the government, through the Affordable Housing Programme (AHP), is committed to addressing the issue. Consequently, the demand for affordable housing continues to surge, driven by increased participation from private sector entities entering into Public Private Partnerships (PPPs),
2. Demographics: Kenya continues to witness positive demographics as evidenced by Kenya’s relatively high urbanization and population growth rates of 3.8% p.a and 2.0% p.a, respectively, against the global averages of 1.7%p.a and 0.9% p.a, respectively, as at 2023. As such, the demand for Real Estate development in the country continues to increase, and,
3. Access to Credit: High mortgage interest rates currently at 14.3% and high transaction costs, have made it difficult for low- and middle-income earners to afford mortgages. Nonetheless, we foresee that heightened cooperation among industry stakeholders and the Kenya Mortgage Refinance Company (KMRC) will help alleviate this challenge. Particularly noteworthy are the government's initiatives aimed at enhancing accessibility to affordable home loans for Kenyans, offering reduced interest rates starting from 9.5%. These measures are poised to enhance the effectiveness of mortgage lending by enhancing accessibility to home loans, thereby stimulating higher adoption rates across the nation.

In terms of supply, the residential sector has been largely constrained by insufficient access to affordable funding by developers, and bureaucracies and delays in approval processes. In 2025, new supply is also expected to slow down owing to:

1. Rising construction costs: In 2024, construction costs decreased by 8% to an average of Kshs 66,375 per SQM from an average of Kshs 71,200 per SQM recorded in 2023. This decrease can be attributed to the Kenyan shilling’s appreciation against the US Dollar, strengthening from Kshs 153.3 in December 2023 to Kshs 129.0 by December 2024,
2. Constrained Access to Financing: Lenders continue to tighten their lending requirements and demand more collateral from developers as a result of elevated credit risk in the Real Estate sector as evidenced by the 16.6% increase in gross Non-Performing Loans (NPLs) to Kshs 118.6 bn in Q4’2024, from Kshs 101.7 bn recorded during Q4’2023, and,

Section II: Recent Developments in the Sector

In FY’2024/25, the government announced the following regulations, policies, measures, and proposals affecting the residential sector namely:

1. The Kenyan government proposed amendmentsto the Land Act 2012 seek to shorten the period within which affordable housing loan defaulters must regularize their payments before lenders can initiate foreclosure. The changes would reduce the default notice window from 90 to 45 days and the foreclosure notice from 40 to 20 days. For more information, please see our Cytonn Weekly #16/2025,
2. The Kenyan government introduceda State-backed initiative to provide affordable mortgages of up to Kshs 6.0 mn to non-salaried workers, aiming to enhance homeownership among the informal sector, which comprises approximately 83.0% of the nation's 18.0 mn labor force. For more information, please see our Cytonn Q1’2025 Markets Review,
3. The Kenyan government has introduceda Kshs 10.0 bn low-cost mortgage scheme aimed at facilitating rural home construction. This initiative, funded by the Housing Levy, offers single-digit interest loans repayable over ten years, with individual applicants eligible for up to Kshs 5.0 mn and multiple-family dwellings up to Kshs 10.0 mn. For more information, please see our Cytonn weekly #51/2024 ,
4. Affordable Housing Act 2024: This enactment follows a rigorous legislative process, spurred by a High Court ruling that declared the previous housing levy unconstitutional, citing administrative and discriminatory flaws. In the wake of this ruling, the government embarked on creating a more robust and inclusive framework for addressing the nation's housing needs. For more information, please see our Cytonn Weekly #12/2024, and,
5. FY’2025/26 Budget Statement: the 2025 Budget Policy Statement indicates that the government's allocation for Infrastructure, Energy, and Information and Technology (ICT) for the fiscal year 2025/2026 is expected to be Kshs 504.6 bn, a 0.2% decrease from the previous fiscal year's allocation of Kshs 505.7 bn. The decreased budgetary allocation to the Infrastructure, Energy, and Information and Technology (ICT) sector in the FY’2025/26 Budget Statement is attributed to various factors, including the government’s fiscal policy stance to prioritize reduction of public debt vulnerabilities especially after the June 2024 protests that led to the withdrawal of the Finance Bill 2024 leading to revenue shortfalls and a revised fiscal framework.

It is important to highlight that various multilateral institutions, private entities, and the government have embarked on diverse approaches to secure funding for residential projects, including leveraging the capital markets and offering grants and loans. These initiatives are aimed at bolstering the supply side of the affordable housing initiative, with the goal of achieving an annual target of 250,000 units. Additionally, organizations have actively pursued partnerships and agreements to facilitate the realization of their residential projects. Some of the notable initiatives include;

1. KCB Bank and Mi Vida Homes entereda partnership to accelerate the development of eco-friendly, affordable housing in Kenya. This collaboration supports the government’s Affordable Housing Programme, which aims to deliver 250,000 units annually to bridge the country’s significant housing deficit. Under the agreement, KCB will provide construction financing for Mi Vida’s projects and also offer mortgage loans to buyers, aiming to make homeownership more accessible. Mi Vida plans to develop 5,000 homes over the next five years, focusing on well-planned, sustainable communities. For more information, please see our Cytonn Weekly #15/2025,
2. Shelter Afrique Development Bank (ShafDB) and the African Union (AU) have signeda Memorandum of Understanding (MOU) to address Africa's significant housing deficit, estimated at 0 mn units with a financing gap of USD 1.4 tn. For more information, please see our Cytonn weekly #51/2024,
3. Centum Real Estate announced a strategic partnership with Gulf African Bank to offer Shariah-compliant mortgage financing to its customers. This collaboration aims to expand home financing options and drive the uptake of Centum's property portfolio. Under the agreement, customers will access up to 90.0% mortgage financing with a repayment period of up to 20 years and an expedited 48-hour approval process. For more information, please see our Cytonn weekly #46/2024,
4. Shelter Afrique Development Bank (ShafDB) and the regional stock exchange serving the West African Economic and Monetary Union (WAEMU) region, Bourse Régionale des Valeurs Mobilières (BRVM), announced the signing of a partnership aimed at addressing Africa’s housing deficit, by establishing a framework to mobilize financial resources through innovative instruments such as green, sustainability-linked, and social bonds, as well as Real Estate Investment Trusts (REITs). For more information, please see our Cytonn monthly Report-October 2024 .

In terms of financing for residential unit demand, the government is intensifying its efforts to facilitate affordable mortgages via the Kenya Mortgage Refinance Company (KMRC). The objective is to enhance accessibility to homeownership for Kenyan citizens by offering long-term, low-interest home loans to prospective buyers. In 2023, KMRC successfully refinanced 3,128 mortgages at an advantageous interest rate of 5.0%. Some of the notable highlights regarding affordable mortgages include;

1. The Kenyan government  secured Kshs 559.6 mn from the World Bank Group to initiate a credit guarantee scheme aimed at providing affordable mortgages to non-salaried workers, commonly referred to as "hustlers." This initiative, managed by the Kenya Mortgage Guarantee Trust (KMGT), seeks to mitigate lender risk by covering up to 40% of potential mortgage defaults, encouraging financial institutions to extend home loans to informal sector workers who typically lack consistent income streams. For more information, please see our Cytonn Q1’2025 Markets Review,
2. The Kenya Mortgage Refinance Company (KMRC) broadened its refinancing services to include non-shareholders, such as SACCOs and microfinance institutions. This is a strategic move to improve access to affordable mortgages, particularly for low- and middle-income earners, a key target of Kenya's affordable housing agenda. For more information, please see our Cytonn Weekly #39/2024.

Section III: Residential Market Performance

In FY’2024/25 there was a slight decrease in residential market performance in Nairobi Metropolitan Area, with the average total returns to investors coming in at 5.8%, a 0.3%-point decline from 6.1% recorded in FY’2023/24. The performance was attributed to a decrease in the residential average y/y price appreciation which came in at 0.4% in FY’2024/25, 0.2%-points lower than the 0.6% appreciation recorded in FY’2023/24, driven by slowed property transactions during the year. On the other hand, the average rental yield came in at 5.4% in FY’2024/25, recording a 0.1%-points decline from the 5.5% rental yield recorded in FY’2023/24. The average rental yield came in at 5.5% in FY’2023, recording a 0.4%-points increase from the 5.1% rental yield recorded in FY’2022/23. This was driven by a decline in the average rent per SQM by 5.3 % to Kshs 567, from Kshs 599 recorded in FY’2023. The table below shows the comparison between the performance in FY’2024’25 and FY’2023/24;

Cytonn Report: Residential Market Performance Summary: FY’2024/25 - FY’2024/25
Segment	Average of Price per SQM FY'2024/25	Average of Rent per SQM FY'2024/25	Average of Rental Yield FY'2024/25	Average of Price Appreciation FY'2024/25	Average of Total Returns FY'2024/25	Average of Rental Yield FY'2023/24	Average of Price Appreciation FY'2023/24	Average of Total Returns FY'2023/24	y/y ∆ in Rental Yield (% points)	y/y ∆ in Price Appreciation (% points)	y/y ∆ in Total Returns (% points)
Detached Units
High End	198,900	863	4.8%	0.1%	4.9%	5.4%	0.4%	5.8%	(0.6%)	(0.3%)	(0.9%)
Lower Middle	80,839	362	4.9%	0.6%	5.5%	5.3%	0.8%	6.1%	(0.4%)	(0.2%)	(0.6%)
Upper Middle	145,906	632	5.0%	0.3%	5.3%	5.4%	0.4%	5.7%	(0.4%)	0.0%	(0.4%)
Detached Units Average	141,882	619	4.9%	0.4%	5.2%	5.4%	0.5%	5.9%	(0.5%)	(0.1%)	(0.6%)
Apartments
Lower Mid- End Suburbs	91,530	473	5.7%	0.0%	5.7%	5.8%	0.8%	6.6%	(0.1%)	(0.8%)	(0.9%)
Upper Mid- End	118,861	652	6.0%	1.2%	7.2%	5.7%	0.1%	5.8%	0.3%	1.1%	1.4%
Lower Mid-End Satellite Towns	73,997	421	6.3%	(0.1%)	6.2%	5.6%	0.9%	6.5%	0.7%	(1.0%)	(0.3%)
Apartments Average	94,796	515	6.0%	0.4%	6.4%	5.7%	0.6%	6.3%	0.3%	(0.2%)	0.1%
Residential Market Average	118,339	567	5.4%	0.4%	5.8%	5.5%	0.6%	6.1%	(0.1%)	(0.2%)	(0.3%)

Source: Cytonn Research

Sub-Market Analysis

In our submarket analysis, we classified the various suburbs in the Nairobi Metropolitan Area into three segments;

High End Segment – Consists of prime suburbs in Nairobi, such as Karen, Runda and Kitisuru. The majority of these areas have been designated for low-rise residential construction and are distinguished by their large, luxurious villas and bungalows,

Upper Middle-Income Segment – Consists of suburbs zoned for both high rise and low-density houses such as Kilimani, Lavington, Kileleshwa, Loresho, and Ridgeways among others. The population in these zones are middle class but with higher incomes than the average characterization of middle class,

Lower Middle-Income Segment – Consists of suburbs in Nairobi habited by middle class such as Ruiru, Kikuyu, Ruaka, Dagoretti, Upper Kabete (Uthiru and parts of Mountain View), and Ngong Road (Race Course, Lenana, Corner), among others.

1. Detached Units

The segment registered an average total return of 5.2%, 0.6% lower than the 5.8% recorded in FY’2023. The performance was driven by a 0.4%-points decrease in the average rental yield to 4.9% in FY’2024, from 5.3% recorded in FY’2023. The decrease in performance was attributable to a 7.7% decrease in the average rents per SQM to Kshs 619 in FY’2024, from Kshs 671 recorded in FY’2023. The best-performing segment was the Lower-middle segment offering an average total return of 5.5%, attributable to a relatively high average price appreciation of 0.6%, 0.2%-points higher than the detached market average appreciation of 0.4%. The impressive performance of the segment was driven by returns from well-performing nodes such as Kitengela, Ngong and Juja, which have continued to offer relatively high returns to investors. Overall, Kitengela was the best-performing node, offering the highest returns at 6.7%, 1.5% points higher than the detached market average of 5.2%, driven by a relatively high y/y price appreciation of 1.7%. The node has seen increased detached unit property investments owing to an inflow of residents brought about by the enhanced accessibility to the Nairobi CBD through various roads such as Mombasa road and the Nairobi Express way. Also, the area enjoys proximity to various amenities such as the SGR and JKIA. Ngong followed with an average total return of 6.4%, 1.2% points higher than the detached market average of 5.2%.

All values in Kshs unless stated otherwise
Cytonn Report: Residential Detached Units Summary FY’2024/25
Area	Average of Occupancy FY'2024/25	Average of Annual Uptake FY'2024/25	Average of Rental Yield FY'2024	Average of Price Appreciation FY'2024	Average of Total Returns FY'2024/25	Average of Rental Yield FY'2023/24	Average of Price Appreciation FY'2023/24	Average of Total Returns FY'2023/24	Change in Rental Yield (% Points)	Change in Price Appreciation (% Points)	Change in Total Returns (% Points)
High End
Lower Kabete	92.9%	10.4%	4.9%	1.1%	6.0%	4.6%	1.0%	5.6%	0.3%	0.1%	0.4%
Rosslyn	92.9%	11.2%	5.2%	0.0%	5.2%	5.4%	(0.3%)	5.1%	(0.2%)	0.3%	0.1%
Runda	95.9%	8.9%	5.2%	(0.4%)	4.8%	5.1%	0.2%	5.3%	0.1%	(0.6%)	(0.5%)
Karen	91.6%	10.6%	4.5%	0.0%	4.5%	6.6%	(0.1%)	6.5%	(2.1%)	0.1%	(2.0%)
Kitisuru	90.7%	9.7%	4.2%	0.0%	4.2%	5.1%	1.1%	6.2%	(0.9%)	(1.1%)	(2.0%)
Average	92.8%	10.2%	4.8%	0.1%	4.9%	5.4%	0.4%	5.8%	(0.6%)	(0.3%)	(0.9%)
Upper Middle
South B/C	89.6%	10.6%	6.4%	(0.1%)	6.3%	4.3%	0.2%	4.5%	2.1%	(0.3%)	1.8%
Loresho	90.6%	10.6%	5.6%	0.1%	5.7%	5.3%	0.0%	5.3%	0.3%	0.1%	0.4%
Redhill/Sigona	92.0%	10.9%	5.3%	0.4%	5.7%	5.4%	0.9%	6.3%	0.1%	(0.5%)	(0.6%)
Runda Mumwe	91.1%	14.8%	4.7%	0.7%	5.4%	4.8%	1.2%	5.9%	(0.1%)	(0.5%)	(0.5%)
Ridgeways	87.5%	9.7%	5.0%	0.0%	5.0%	6.2%	(0.2%)	6.0%	(1.2%)	0.2%	(1.0%)
Lavington	91.2%	9.8%	3.8%	0.8%	4.6%	6.3%	(0.6%)	5.7%	(2.5%)	1.4%	(1.1%)
Langata	91.1%	7.6%	4.2%	0.0%	4.2%	4.3%	0.6%	4.9%	(0.1%)	(0.6%)	(0.6%)
Average	90.4%	10.6%	5.0%	0.3%	5.3%	5.4%	0.3%	5.7%	(0.4%)	0.0%	(0.4%)
Lower Middle
Kitengela	91.1%	10.7%	5.0%	1.7%	6.7%	5.0%	0.7%	5.7%	0.0%	1.0%	1.0%
Ngong	94.4%	7.3%	5.2%	1.2%	6.4%	5.8%	1.5%	7.3%	(0.6%)	(0.3%)	(0.9%)
Juja	89.0%	8.1%	4.3%	1.9%	6.2%	5.5%	0.5%	6.0%	(1.2%)	1.4%	0.2%
Thika	83.2%	11.6%	5.5%	0.4%	5.9%	5.3%	0.0%	5.3%	(0.2%)	0.4%	0.6%
Rongai	96.9%	11.4%	5.2%	0.5%	5.6%	4.5%	0.4%	4.9%	0.7%	0.1%	0.7%
Syokimau/ Mlolongo	91.6%	11.2%	4.9%	0.0%	5.0%	5.5%	1.6%	7.1%	(0.6%)	(1.6%)	(2.1%)
Athi River	88.6%	9.8%	4.9%	(0.6%)	4.3%	5.6%	1.1%	6.7%	(0.7%)	0.5%	(2.4%)
Donholm/ Komarock	87.5%	9.9%	4.0%	0.0%	4.0%	4.8%	(0.3%)	4.5%	(0.8%)	0.3%	(0.5%)
Average	90.3%	10.0%	4.9%	0.6%	5.5%	5.3%	0.8%	6.1%	(0.4%)	(0.2%)	(0.6%)
Detached Average	91.2%	10.2%	4.9%	0.4%	5.2%	4.3%	0.5%	5.8%	0.6%	(0.1%)	(0.6%)

Source: Cytonn Research

2. Apartments

The segment posted a slight decrease in performance with the average total returns to apartments’ investors coming in at 6.4%, recording a 0.2%-points increase from the 6.2% recorded during FY’2023. The slight improved performance was driven by a 0.2%-points increase in the average rental yield to 5.9% in FY’2024, from 5.7% recorded in FY’2023. This was driven by a slightly increased apartment property transactions during the period, attributable to 4.0% points increase in the average occupancy to 91.6% in FY’2024 from 87.6% in FY’2023. The best-performing segment was the upper mid-end suburbs towns with average total returns of 7.1%, attributed to a relatively high average y/y price appreciation of 1.2% and rental yield of 6.0%. The impressive performance of the segment was driven by returns from well-performing nodes such as Westlands, parklands, Kileleshwa and Kilimani that have continued to offer competitive returns to investors in comparison to other segments. Overall, the best-performing node was Kahawa West, offering investors average total returns of 12.0%, 5.6%-points higher than the apartment market average total return of 6.4%. Kahawa West is attracting apartment investments owing to infrastructural development with the roads such as Thika Road, proximity to CBD favouring residents in the area, a high number of middle-class families in the area, proximity to retail centers such as Garden City, Juja Mall, and Thika Road Mall, and proximity to higher learning institutions such as Kenyatta University. The table below shows the NMA residential sector detached units’ performance during FY’2024/25;

All values in Kshs unless stated otherwise
Cytonn Report: Residential Apartments Summary FY’2024/25
Area	Average of Occupancy FY'2024/25	Average of Annual Uptake FY'2024/25	Average of Rental Yield FY'2024/25	Average of Price Appreciation FY'2024/25	Average of Total Returns FY'2024/25	Average of Rental Yield FY'2023/24	Average of Price Appreciation FY'2023/24	Average of Total Returns FY'2023/24	Change in Rental Yield (% Points)	Change in Price Appreciation (% Points)	Change in Total Returns (% Points)
Upper Mid-End
Westlands	90.1%	14.5%	6.3%	4.4%	10.6%	5.7%	0.8%	6.5%	0.6%	3.6%	4.1%
Parklands	92.7%	12.4%	6.2%	1.5%	7.7%	5.4%	0.0%	5.4%	0.8%	1.5%	2.3%
Kileleshwa	96.1%	10.8%	6.6%	0.0%	6.6%	5.6%	0.5%	6.1%	1.0%	(0.5%)	0.5%
Kilimani	92.8%	12.8%	6.3%	0.3%	6.6%	5.8%	0.4%	6.2%	0.5%	(0.1%)	0.4%
Upperhill	88.3%	10.1%	5.8%	0.5%	6.2%	6.0%	(0.8%)	5.2%	(0.2%)	1.3%	1.0%
Loresho	95.8%	7.2%	4.5%	0.3%	4.8%	5.9%	(0.2%)	5.7%	(1.4%)	0.5%	(0.9%)
Average	92.6%	11.3%	5.9%	1.2%	7.1%	5.7%	0.1%	5.8%	0.2%	1.1%	1.3%
Lower Mid-End Suburbs
Kahawa West	92.1%	7.2%	3.6%	8.3%	12.0%	5.9%	1.0%	6.9%	(2.3%)	7.3%	5.1%
Dagoretti	88.8%	11.5%	9.6%	1.9%	11.5%	5.7%	0.7%	6.4%	3.9%	1.2%	5.1%
Waiyaki Way	91.9%	12.3%	5.7%	0.9%	6.6%	5.7%	1.8%	7.5%	0.0%	(0.9%)	(0.9%)
Race Course/Lenana	85.5%	10.8%	5.7%	0.8%	6.5%	6.1%	0.6%	6.7%	(0.4%)	(0.2%)	(0.2%)
South B	93.0%	12.1%	4.8%	0.0%	4.8%	6.0%	(0.3%)	5.7%	(1.2%)	0.3%	(0.9%)
South C	84.9%	14.0%	4.0%	0.0%	4.0%	5.8%	1.4%	7.2%	(1.8%)	(1.4%)	(3.2%)
Langata	93.3%	10.0%	4.4%	(0.6%)	3.8%	5.7%	(0.2%)	5.5%	(1.3%)	(0.4%)	(1.7%)
Imara Daima	95.9%	8.3%	5.8%	(2.7%)	3.1%	5.3%	1.7%	7.0%	0.5%	(4.4%)	(3.9%)
Average	90.7%	10.8%	5.5%	1.1%	6.5%	5.8%	0.8%	6.6%	(0.3%)	0.3%	(0.1%)
Lower Mid-End Satellite Towns
Ngong	93.7%	11.0%	6.2%	3.1%	9.3%	5.8%	0.9%	6.7%	0.4%	2.2%	2.6%
Ruaka	90.9%	12.5%	5.1%	3.2%	8.3%	5.1%	1.5%	6.6%	0.0%	1.7%	1.7%
Syokimau	87.8%	10.9%	5.4%	2.5%	7.9%	5.4%	0.6%	6.0%	0.0%	1.9%	1.9%
Ruiru	87.1%	12.6%	5.9%	0.0%	5.9%	5.5%	1.0%	6.5%	0.4%	(1.0%)	(0.6%)
Rongai	89.7%	11.9%	5.5%	(0.4%)	5.1%	6.0%	(0.4%)	5.6%	(0.5%)	0.0%	(0.5%)
Kikuyu	95.8%	15.0%	6.5%	(1.9%)	4.5%	5.2%	0.3%	5.5%	1.3%	(2.2%)	(1.0%)
Athi River	97.1%	11.7%	9.4%	(7.1%)	2.3%	5.9%	1.5%	7.4%	3.5%	(8.6%)	(5.1%)
Average	91.4%	12.4%	6.3%	(0.6%)	5.7%	5.6%	0.9%	6.5%	0.7%	(1.5%)	(0.8%)
Apartment Average	91.6%	11.5%	5.9%	0.5%	6.4%	5.7%	0.6%	6.3%	0.2%	(0.1%)	0.1%

 Source: Cytonn Research

Section IV: Conclusion, Market Outlook, and Investment Opportunity

We incorporated demand, infrastructure, purchasing power, access to credit, and performance, as the key metrics to gauge our sentiment for the sector going forward.

Key: Green – POSITIVE, Grey – NEUTRAL, Red – NEGATIVE

Cytonn Report: Residential Demand Outlook
Metric	FY'2024/25 Experience and Outlook going forward	2024 Outlook	2025 Outlook
Demand	·       According to World Bank Kenya has relatively high urbanization and population growth rates averaging 3.8% and 2.0% respectively, compared to the global averages of 1.7% and 0.9%, respectively, as of 2023. This will continue to provide sustained demand for more housing units in the country	Positive	Positive
Infrastructure	·        The government aims at completing various infrastructural projects in the country including Riruta – Lenana – Ngong Railway Line, fast-track construction of Phase I of the Nairobi Railway City (NRC) Project, the Meter Gauge Railway (MGR) Link from Mombasa SGR Terminus to Mombasa MGR Station, and the Railway Bridge across Makupa Causeway. The government also aims to acquire a new ferry for Lake Victoria, complete construction of the control tower at Kisumu Airport, and complete rehabilitation of the terminal building and apron at Ukunda Airport	Neutral	Positive
Purchasing Power	·       Two direct indicators of purchasing power, inflation, and currency performance, have shown better performance in Q1'2025. The Kenyan Shilling has been appreciating against major currencies such as the US dollar, while inflation has slowed for the better part of Q1'2025. Looking ahead, we anticipate that consumers' purchasing power will improve, although they are still affected by heavy taxation and persistent unemployment.	Neutral	Neutral
Access to Credit	·       The government has continued to promote access to affordable credit through the Kenya Mortgage Refinance Company (KMRC) which has been crucial in providing Kenyans with low cost loans increasing home ownership   ·       However, lenders continue to tighten their lending requirements and demand more collateral from developers as a result of elevated credit risk in the Real Estate sector as evidenced by the 16.7% increase in gross Non-Performing Loans (NPLs) to Kshs 118.6 bn in Q4’2024, from Kshs 101.7 bn recorded during Q4’2023	Neutral	Neutral
Performance	·       Residential sector in 2024/25 recorded slight decline in average total returns coming in at 5.8% from 6.1% recorded in 2023/24. The performance was attributed to a decrease in the price appreciation at 0.4% in FY’2024/25, 0.2%-points lower than the 0.6% appreciation recorded in FY’2023/24, driven by slowed property transactions during the year   ·       We expect more investments in the lower-middle segment offering an average total return of 5.5%, higher than the detached market average of 5.2%. Apartments in Westlands, Kahawa West and Ngong recorded the highest returns at 10.6%, 12.0% and 9.3% respectively, higher than the market average of 6.4%	Neutral	Neutral

We have identified three neutral outlooks on performance, purchasing power, and access to credit, and two positive outlooks on demand and infrastructure. Therefore, our general market outlook for the residential sector in 2025 is NEUTRAL. This is mainly driven by the increase in population, especially in urban areas, which is fueling the need for housing. Although this demand is being continuously addressed by the government through the implementation of the affordable housing program, there still remains a large deficit. Additionally, activities by players in the residential sector are poised to help address the housing shortage and improve the sector's performance. We expect the government to make major progress with the already established infrastructure projects in the pipeline and to launch other new projects in order to open up more satellite areas. We anticipate that the purchasing power of consumers, backed by the improved Kenya shilling and inflation, will sustain performance in the long term. However, we expect sector performance to be dampened by low penetration of mortgages and regulatory hindrances such as approval of building plans, high construction costs, and tough economic conditions such as high taxation. For detached units, investment opportunities lie in areas such as Lower Kabete, South B/C, and Kitengela, while for apartments, investment opportunities are in Westlands, Kahawa West, and Ngong, driven by the current performance in terms of returns to investors.

Disclaimer: The views expressed in this publication are those of the writers where particulars are not warranted. This publication is meant for general information only and is not a warranty, representation, advice or solicitation of any nature. Readers are advised in all circumstances to seek the advice of a registered investment advisor.