How does a standard three-bedroom house cost compare with other African countries and parts of the world?

For a normal salaried laborer in Nairobi, to own a house in Nairobi is a dream that is good from far, but only to realize that it is far from good. The property market in Nairobi –Kenya purchasing a 3-bedroom house would cost anything from 7 million you on average within a 20km radius from CBD. 

At www.propertyzote.com a leading online property-listing portal a 3 bedroom on average goes for 9.01 Million and from the recent Hass consult Property Index 2011 Quarter one 2011 report, the average value of a 1-3 bedroom property is currently at 10.77 million.

To buy a house on a mortgage loan of 6 million, cost of borrowing at 13.5 % pa, for 20 years your monthly repayment will be Kshs.72, 442 meaning after 20 years you have paid a total of Kshs.17, 386,080(240 x 72,442).

There seems to be a drop in deposit rates, the main driver of the ongoing aggressive cut in lending rates that are now spreading to the mortgage market. Barclays bank reduced its mortgage to 11.99 per cent will run till the end of September as it seeks to grow its mortgage business.

KCB mortgage rate dropped from 15 to 13.5 percent, while Stanchart reintroduced its 10.9 per cent fixed mortgage offering. Housing Finance currently offers mortgages at 12.5 per cent base mortgage rate and is gearing up for a Sh10 billion corporate bond as it positions itself for long term housing development projects

However, across Africa, Uganda’s mortgage rates remain high compared with Kenya. Uganda’s residential mortgage is at 22.02 per cent while the commercial mortgages stood at 21.81 per cent, according to BoU’s economic survey.

Taking an average of properties in Uganda listed at www.propertyzote.com a 1-3 bedroom house in Uganda would cost you Ksh.12 million. The same house in Dar es Salam Tanzania is going for Ksh.9.8 million. High cost of land, building materials and market speculation by estate agents is fueling this. In South Africa a 3- bedroom at Sonstraal Heights, Durbanville Western Cape goes for Ksh.13.8 million. From www.realeststeweb.co.za the average nominal value of medium-sized homes (141m²-220m²) declined by a marginal 0,1% y/y in April 2011, after rising by only 0,1% y/y in the preceding month. This brought the price of a medium-sized house to about R972 900 (Ksh.11.6) in April. A real price decline of 3,9% y/y occurred in this category of housing in March 2011. South Africa’s mortgage rate is at 11.5%.

A study done by the Institute for Housing America, titled “International Comparison Mortgage Product Offerings” Interest rates are lower than 6% which I believe are very manageable levels, for instance; in Sweden mortgage rates is at 4%, Japan at 3%, UK at 5%, Australia is the highest at close to 7%.

Around the world a 3-bedroom house in a suburb at Waterworks Road, Red Hill Qld-Australia would go for not less than Ksh.70 Million. The same house in the Cornforth Way, Widnes WA8 Liverpool-UK goes for Ksh.25, 145,764 Million.

Looking at this house prices I conclude that property prices in Kenya are still affordable. The Kenyan Government should increase on the basic pay. This explains a lot why Kenyans in diaspora find it very affordable to buy property in Kenya. For them it is more than a bargain.

Check out www.propertyzote.com for properties in Kenya, Uganda, Tanzania and Rwanda