Why that SUV owner now lives in your ‘humble’ estate

It all started with a tweet that went viral.

A Twitter user had noted that his neighbourhood, which was initially full of low-range vehicles, was now teeming with fuel guzzlers.

And no, these were not vehicles owned by visitors. They belonged to his new neighbours.

“My previous Naivasha Road residence was full of Toyotas and an occasional BMW 320. By October, a Range Rover and X6 tenant moved in. Downscaling happened before my eyes,” tweeted Ferdinand Omondi, a journalist.

More Kenyans joined in the discussion, and surprisingly, many too said they were increasingly witnessing the same scenarios in their estates as the effects of Covid-19 pandemic continued to bite.

Landlords in low and lower middle-class estates are now making a killing as their rentals are being snapped up quickly by tenants who previously lived in middle-class estates.

Distressed

Conversely, their counterparts in the high-end estates are distressed.

Many of their rentals are now empty, their tenants having jumped ship, opting for the more affordable houses.

Real Estate Analyst and Investment Consultant Beatrice Wanjiku explained the phenomenon.

“The low and mid-end markets have registered increased demand for housing units, which has resulted in a boost for returns for investors within this market segment,” she said.

“The exodus from high-end residential markets to low and mid-end segments has resulted in reduced returns for investors within the former markets as developments record reduced transaction volumes and high vacancy rates. This has even prompted landlords to lower rental rates and offer discounts to attract new tenants and/or maintain the existing clients.”

Covid-19 pandemic effects

The investment consultant attributed the massive exodus to the pandemic, which has resulted in an overall slowdown in the economy that consequently led to pay cuts, loss of jobs and overall dwindling of profits for businesses.

“This has resulted in reduced disposable income, and thus affected the availability of finances available for households to spend on housing, thus the shift to more affordable housing options. In addition, with the current market uncertainties, individuals have seen the need to scale down on housing expenses and redirect the finances to other household expenses,” Ms Wanjiku told the Nation.

The CEO of Superior Homes, Shiv Arora, said whereas many people living in the high-end estates could afford the rent, they could not afford the way of living in their posh neighbourhoods.

“You may be living in Kileleshwa or Kilimani, but you cannot afford the schools in the area. So why would you pay the rent and yet you cannot afford the lifestyle?” he posed.

Whereas some shrewd mid-range home owners in the on-demand estates may have noted the increased appetite for their properties and hiked the rent, Mr Henry Ochieng, the CEO of the Kenya Alliance of Resident Associations (KARA), believes it would not necessarily work for them as the new tenants often conduct a survey before moving in.

“Most of these tenants know the price ranges. They know that, if perhaps I move to Donholm, this is the rate. But if some landlords increase the rent, then it cannot be uniform, but a case-by-case scenario, where price for one client is hiked and for another it is not. However, some landlords have increased them (rents) slightly,” he said.

The flipside, the KARA boss explained, is that landlords in high-end estates have had to reduce their rents in order to attract more tenants.

Mortgages and loans

This, he said, is due to the fact that most have mortgages and loans to service and would rather reduce the rent and re-negotiate with their finance providers. 

“As a landlord, you would rather negotiate with your bank and lower the rent and restructure the payment model than have trouble with the banks,” Mr Ochieng’ said.

The Superior Homes chief, however, does not see the shift to lower-end estates as linked to economic struggles, but rather a pointer to diverse preferences and tastes.

“People are looking for spaces where they can have gardens and feel more relaxed. That is why some will move from the other side of town to Buru Buru, Greenpark (Donholm) and estates along Mombasa Road where there is more space, which are possibly being sold or rented out at a lower price,” he said.

He added that improved infrastructure in nearly all parts of the capital has made it easier for the working class to commute to the CBD with relative ease, making it more realistic to move to other areas.

Mr Ochieng told the Nation that the matter had been noted and discussed by the alliance.

“We have had a conversation in our circles regarding the influx of people from middle and upper class areas in lower-level estates. We have seen people who initially lived in Kilimani and Lavington looking for houses in Buru and Donholm,” Mr Ochieng said.

Pockets running dry

For him, this is a clear indication that things are tough and more pockets are running dry, and this change, he says, is not just in the housing sector, but also being experienced in the education sphere.

“Parents constantly share stories of their children telling them that new classmates from very expensive private schools have joined them in their schools. When parents switch homes, they also have to switch their children’s schools,” he said.

Ms Wanjiku explained that with businesses scaling down to mitigate the effects of the pandemic, in addition to more firms adopting the work-from-home strategy and shifting to e-commerce, the demand for physical retail spaces was greatly reduced.

All these factors affect owners of rental houses. But it is not all doom and gloom for the sector.

“Notably, the continued expansion of retailers such as Naivas has been cushioning the retail sector’s performance,” she said.

Optimism

Though she admitted the real estate sector has been affected, she expressed optimism that things are slowly looking up and the sector would soon be back on its feet.

“We have experienced reduced transaction volumes especially in 2020. However, the sales have begun to pick up this year as the market slowly gets back on track. With the buyers currently focusing on the mid-end market segments, some of our projects within the mid-end market have recorded increased activities and focus from buyers,” she said.

“In the residential sub-sector, overall, we have seen reduced transaction volumes due to reduced disposable income. However, the continued focus by buyers and renters on affordable housing options within the low and mid-end markets has been cushioning the sector’s performance,” she concluded.