By Moses Michira

Nairobi, Kenya: Cabinet Secretary Charity Ngilu has promised to check runaway property prices that, 40 years ago, were a problem for President Jomo Kenyatta’s Government.

Ms Ngilu told parliament’s vetting committee that property prices are out of reach for most Kenyans, echoing the sentiments four decades earlier of Commerce Minister Dr Gikonyo Kiano, who termed the cost of owning homes as an ‘embarrassment’, on May 16, 1973.

Average property prices have risen 20 times since then, driven by pressures that Dr Kiano identified as the wide disparity in land ownership, which put the entire supply chain in the hands of a minority.

“The rocketing prices in Kenya had no economic basis and were an embarrassment, owing to the spillover effects on the cost of all other products,” The East African Standard quoted Kiano saying in its edition exactly 40 years ago, today.

The situation remains as extreme today, with prime assets in major towns rivaling the value of comparable property in any major city globally, despite Kenya ranking as a developing economy.

Inequity

Ngilu has likewise now said the soaring property prices have been driven by inequity in access to land, which precipitated its use for speculative purposes rather than as a factor of production.

“If we do not put the land issues right, poverty can never be addressed,” said Ngilu – who has since taken oath of office after her appointment was upheld by Parliament - referring to the degree to which landlessness had a bearing on the country’s soaring poverty levels.

Kenya’s land problem traces its roots back to the colonial era, when British settlers took most of the land previously owned by natives and put it under coffee and tea plantations.

On independence, only a few Kenyans could buy out foreign interests in the plantations while the vast majority were alienated from property ownership, forming the genesis of the biggest social problem.

In his address to Parliament in 1973, Kiano said his ministry was aware of the anomaly and exploitation of ordinary citizens by landowners disposing of part of the land they owned.

“I am aware that non-citizens preferred to sell their properties directly to local buyers bypassing the Industrial and Commercial Development Corporation (ICDC),” Kiano said, which meant only the rich could purchase the assets.

ICDC is the state-owned lender set up to provide mortgages to Kenyans seeking to acquire property at friendlier interest rates than commercial banks.

Dr Kiano claimed bypassing the ICDC was the main reason for the erratic pricing because there was no independent valuation to determine the fair value of the assets before any sale was completed.

Independent valuation

Lack of an independent valuation every time property was sold, Embu North legislator Jeremiah Nyaga claimed, predisposed Kenyans to exploitation, because sellers quoted higher prices than the fair value.

And competition between buyers caused a pricing crisis that favoured the sellers, mainly non-citizens, according to the MP.

ICDC was also blamed for taking too long in processing loans, which could have been the reason sellers had a preference for cash buyers.

Today, property prices remain on a steady rise, especially in major towns, owing to high demand against low supply, and seeing property till controlled by a minority, and posing a major challenge for the Government in dealing with an impending housing crisis.

The State has also fallen behind in developing housing on its own land, pushing prospective homeowners further outside the main residential areas in major towns.

The housing shortage has also pushed up rental prices, making the Kenyan market one of the most exorbitant in the world relative to average income levels, according to findings of a recent survey by the Hass Property Index covering the quarter to March 2013.

Urban residents

It reported tenants, constituting at least 80 per cent of the urban residents, pay a higher proportion of income in rent than their counterparts in other parts of the world.

The first quarter index showed rental prices for urban housing have continued on a steady trajectory — a scenario increasingly putting a strain on majority of Kenyans already suffering declining purchasing power.