Why Kenya's property sector is cooling after years of growth

Expatriate departures and suppressed middle-class purchasing power are key factors slowing down Kenya’s real estate sector, states a new market report.

According to the Hass Index land price report for July to September, the slowdown in Nairobi’s 14 satellite town land prices continued in the third quarter of 2025, registering a meagre 0.84 per cent increase but reducing the price growth for the year to September to 6.6 per cent.

According to Sakina Hassanali, co-chief executive officer and creative director at Hass Consult, many of these satellite areas, such as Kiserian, Kitengela, and Athi River, have become prime locations for middle-class buyers to develop their own family homes in stages as incomes allow. 

However, dwindling purchasing power is locking out Kenya’s middle-class intent on owning a home in these regions despite the lower land costs.

“Tightening finances are reducing the flow of buyers able to get through the initial entry gate for self-building of a land purchase, despite the far lower and more advantageous prices in the satellite areas,” said Hassanali.

Satellite towns

The Hass Consult report indicates that the average price for an acre in the satellite towns in the third quarter of 2025 was Sh32.3 million, compared with Sh223.9 million in the 18 Nairobi suburbs monitored by the land index.

Satellite towns such as Kiserian and Kitengela offered the lowest-price access points, at an average of Sh13.4 million and Sh18.8 million per acre, the region largely attracting self-builders with the intention of flipping such properties.

However, this model has also seen a fallback as property prices slowed. “Only areas with strong developer demand are now reporting strong land price growth,” said Hassanali.

In the 18 suburbs surveyed for the land index, land prices also slowed down, only rising by 1.22 per cent in the third quarter and by 6.27 per cent in the last year.

Spring Valley, the upmarket residential node near Westlands, led in the appreciation as developers chased large single-home plots to develop into multi-use properties. This is “in line with the rapidly changing character of the area, from exclusively top-of-the-market large homes and gardens to a mixed-use area, with commercial properties and apartments”.

By contrast, some of Nairobi’s top suburbs, such as Muthaiga, saw land prices fall by 0.2 per cent from June to September this year, a move informed by limited appeal for commercial and multi-occupation, scarcity of public transport routes and urban planning restrictions. House prices were also subdued in the third quarter of 2025 than in the previous quarter, but still rose by 1.1 per cent from June 2025 levels, the slight growth driven by scattered demand for detached houses.

“All segments of the market delivered sales price growth in the third quarter, reflecting the market’s solid foundation in cash-driven demand, but it was a subdued quarter of demand, overall, as middle-class incomes remained under pressure,” said Hassanali.

Kenya’s middle class, once seen as the driver of the housing demand, is struggling as inflation and stagnant wages erode their ability to invest in property.

In addition, the shrinking payslip has affected their mortgage uptake, which currently stands at Sh281.5 billion scattered in 30,000 mortgage portfolios in a population of more than 50 million.

The real estate sector has some of the highest gross non-performing loans (NPLs), indicating a suppressed liquidity for the middle class. “The mortgage sector’s non-performing loans (NPLs) surged to Sh40.8 billion in 2023 from Sh37.8 billion, reflecting mounting repayment difficulties. The mortgage sector’s asset quality – the ratio of mortgage NPLs to outstanding mortgages – stood at 14.4 per cent in 2023, a similar level registered in 2022, reflecting the muted mortgage market risk,” says a 2024 report by Kenya Mortgage Refinance Company.

According to the Hass Consult survey, the surge in house demand, which began in late 2023, slowed down in most areas, only witnessing an uptick in Athi River, Ruiru and Tigoni.

In addition, rental prices also fell by 1.6 per cent in Q3, compared to Q2, and 1.3 per cent over the year as demand fell in the detached house market.

The houses are popular with the expatriate community, including heads of international organisations overseeing projects not only in Kenya but in the region.

However, following aid cuts early this year by the government of President Donald Trump, a number of expatriates have left the country, thus suppressing the demand for these houses.

International schools

The expatriate community is a key driver of social amenity developments in most upmarket regions of the city, including Karen, Runda, and Muthaiga, where, in addition to the spacious homes, have proximity to international schools and shopping malls stocking global brands and eateries.

These regions are also favoured by diplomatic staff due to enhanced security.

According to the Centre for Global Development, Kenya was among several countries that saw aid cuts amounting to over $200 million (Sh36 billion).

While a big portion of such funds normally goes towards humanitarian services, especially health, nutrition to malnourished communities and mitigating the effects of drought, a segment of these funds goes to the local real estate sector in terms of long-term rentals or lease payments.

However, the recent changes within the United Nations in New York, where some staff are destined for relocation to Nairobi, may see a reversal of the current downturn in such property demand.

Last year, the United Nations Population Fund (UNFPA) announced plans to relocate almost a quarter of its New York-based workforce to Nairobi, a move that will involve the integration of the current Policy and Strategy Division and the current Technical Division into a Programme Division largely based in Nairobi.

The unit’s Independent Evaluation Office was also earmarked for relocation to Nairobi. Speaking exclusively to The Standard in May this year, Eddie Wright, a media specialist at UNFPA, said Nairobi’s “corresponding support systems” will bring the organisation’s services closer to where they are needed most “in terms of geography or time zone”.

He added that the city was selected after a rigorous process that compared Nairobi with other duty stations around the world, based on criteria “such as staff safety and security, staff experience, UN presence, geographical accessibility, talent availability, and infrastructure.”

“We’ve merged our programme and technical divisions and are locating most of the new division in Nairobi—about 100 positions in total. I believe that’s about a quarter of our headquarters staff. This move has been in the works for a couple of years,” said Wright.

Despite the mixed fortunes in land and property prices, investors and developers remain positive and responsive to the shifting demographics and affordability trends.