An Analysis of Middle- and High-income Rental Housing Supply in Kenya: a Case Study of Uasin Gishu County

Abstract

The supply of real estate in Kenya has been on a constant increase. In 2020, real estate firms reported a decline in residential units’ occupancy rates especially in the high-end market segment pointing at an oversupply. Concurrently, property managers in Uasin Gishu County reported it taking longer to fill rental vacancies in the middle- and higher-income areas, with units previously at 100% occupancy experiencing higher vacancies. This study focused on Uasin Gishu County and sought to establish whether the oversupply trends reported in Nairobi’s middle and high- income areas were being replicated in Uasin Gishu County. The objective of the study was to investigate whether there was an oversupply in the middle- and high- income rental housing in Uasin Gishu County. This was done by monitoring trends in 4 supply indicators: Housing turnover, rental price, quality of developments and the occupancy rates. The study adopted a quantitative and qualitative approach, conducted through online surveys. The respondents were Uasin Gishu renters with a monthly rent of above Ksh.20,000 and property managers. With regards to turnover, a normal rate of turnover (2-to-3-year tenancies) was observed. This was different from a high turnover that is characteristic of oversupplied markets. Additionally, the top reasons cited for moving were related to family and job changes, both not being supply related. It couldn’t therefore be said that supply has outstripped demand. A majority of the respondents observed an increase in price and little increase in incentive offered over the years by landlords in an attempt to secure tenancies. Because price decreases/stagnations and increased incentives by landlords are signs of an oversupplied market, there is no proof of oversupply. Both sets of respondents reported a normal to high occupancy rate. This observation is inconsistent with oversupply as oversupply results in low occupancy. Finally, the data from both tenants and property managers showed a progressive increase in the quality of housing. Such changes can often be seen even in healthy housing markets. Changes in quality of rentals neither proved nor disproved oversupply. Since the results from 3 out if 4 parameters pointed away from an oversupply, it was concluded that the middle- and high- income rental housing market in Uasin Gishu County was not oversupplied.