Kenya’s housing market lost momentum towards the end of last year as price growth slowed across key segments
Kenya’s housing market lost momentum towards the end of last year as price growth slowed across key segments, reflecting weaker demand and shifting buyer preferences in a sector that has faced sustained pressure from high borrowing costs as well as constrained incomes.
Latest data from the Kenya National Bureau of Statistics (KNBS) shows that residential property inflation eased to 4.5 per cent in the final quarter of 2025, down from 7.3 per cent in a similar period a year earlier, signalling a cooling market after a period of post-pandemic recovery.
The slowdown was more pronounced in standalone houses, where inflation dropped to 7.0 per cent from 11.1 per cent, while apartment prices posted a contraction of 1.2 per cent compared to a 1.1 per cent decline in the same quarter of 2024.
The divergence between housing types highlights a market increasingly split along income lines, with demand for high-end and standalone units holding relatively firm while apartments, typically targeting middle-income buyers, face declining uptake.
The easing price growth comes against the background of tighter financial conditions over the past year, with elevated interest rates raising the cost of mortgages and reducing affordability for prospective homeowners.
Cement consumption, building approvals, and private sector credit to real estate are among the indicators closely watched to gauge the health of the property market.
Kenya’s mortgage market remains relatively small, with fewer than 30,000 active home loans, meaning most buyers rely on cash or incremental building, which leaves demand highly sensitive to income shocks and liquidity constraints.
The moderation in property prices also comes against a backdrop of reduced speculative activity, which had previously driven price spikes in urban areas such as Nairobi’s satellite towns and emerging middle-class neighbourhoods.
Developers have increasingly shifted focus to clearing existing inventory rather than launching new projects, reflecting slower absorption rates and growing caution in committing capital to large-scale residential developments.
Industry data has shown a rise in unsold housing units in recent years, especially in the apartment segment, where oversupply in some areas has forced developers to offer discounts, flexible payment plans, and rental guarantees to attract buyers.
The apartment segment’s negative inflation underscores these pressures, with supply outpacing demand in key urban nodes, even as population growth and urbanisation continue to support long-term housing needs.
Construction has also remained uneven, with developers prioritising phased projects and mixed-use developments to spread risk and align supply more closely with market demand.
Banks have tightened lending standards in response to rising non-performing loans in the real estate sector, further restricting access to financing for both developers and buyers.
At the household level, income growth has lagged inflation in recent years, reducing purchasing power and limiting the ability of many Kenyans to enter the property market.
This has contributed to a growing mismatch between the types of housing being built and what the majority of buyers can afford, particularly in urban areas.
The government has sought to stimulate the sector through its affordable housing programme, which aims to deliver thousands of units while also creating jobs and supporting allied industries such as cement, steel, and transport.
The construction and real estate sectors have historically contributed significantly to Kenya’s gross domestic product (GDP), and shifts in property activity often have wider implications for economic growth.
Cement consumption, building approvals, and private sector credit to real estate are among the indicators closely watched to gauge the health of the property market.
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