They attribute this trend in part to demand by non-Kenyans, most of them from war-torn Somalia.
The areas most affected are Nairobi, Mombasa and other major urban centres where the price of land has more than doubled as property is sold long before it is ready for occupation.
And the increase in prices has not only affected upmarket areas but low and middle-income residential neighbourhoods as well.
Findings by the Sunday Nation follow investigations by international security agencies that have discovered that millions of dollars reaped from piracy along the Somali coast and drug trafficking are finding their way into Kenya and other parts of the world through an intricate money-laundering scheme masterminded by international criminal syndicates.
The money-laundering, which also involves proceeds from tax evasion, has focused the attention of international security agencies on Kenya, which is being seen as a regional hub for the illicit activities.
Areas of Nairobi most affected by the rise in property prices include Karen where the cost of an acre of land has jumped from about Sh5 million three to five years ago to at least Sh15 million today.
At Kilimani, an acre of land now goes for a staggering Sh70 million, with property valuers and conveyancing lawyers warning that the situation could get out of hand unless checked.
At Parklands, an eighth of an acre sells for Sh50 million, while at nearby Eastleigh, a similar piece is going for between Sh20 million and Sh25 million.
Rents have also skyrocketed. In congested Eastleigh a two-bedroom flat that went for Sh10,000 two years ago is renting for Sh25,000 a month today.
At Nairobi West, a three-bedroom house was renting for Sh25,000 two years ago; today the rent is between Sh30,000 and Sh38,000.
Real estate experts and lawyers say that much of the money that has flooded into the market comes from Kenyans, including Kenyan Somalis, living outside the country.
And some comes from businesspeople who have fled conflict in Somalia, the Democratic Republic of Congo and Burundi.
Many properties in upmarket Nairobi areas including Karen, Upper Hill, Kilimani, Lavington, Westlands and Parklands have changed hands at prices that in the recent past would have been considered outlandish.
Investigations by the Sunday Nation have established that the cost of 10 acres at Karen, which had been put on the market for at least Sh4.5 million an acre, was recently raised to Sh6.5 million when a Somali national made inquiries.
A Kenyan, who also asked not to be identified, was eyeing a property on Kirichwa Road in Kilimani, Nairobi. The bungalow on a quarter-acre of land had been advertised for Sh25 million. It was eventually sold for Sh35 million.
In Nairobi's Upper Hill area, next to Hill Park Hotel, a prime property recently changed hands and has undergone thorough renovation. It was not possible to determine the cost; the building is now being leased as an office block.
In the city centre, two prime plots, one on Loita Street and another next to the Uchumi supermarket near Koinange Street, are also said to have been bought by foreigners.
Timothy Njehia, managing director of Crystal Valuers, told the Sunday Nation that property in Nairobi has appreciated by more than 100 per cent in the past three years.
Remittances from the diaspora have spurred the market and pushed up prices of property by more than 100 per cent, he said.
The skyline of Eastleigh, a former residential estate, has changed markedly in the past decade as multi-storeyed buildings replace single-level dwellings.
Somalis have pushed the prices of property to an all-time high in the past three years because price to them is not an issue, James Katana of Green Leaves Properties, Mombasa, said.
He claimed that Somali nationals have taken control of major estates in Mombasa, like Nyali, Tudor, Old Town and Kizingo.
They are even demolishing most of the properties they are buying and building flats which they are converting into apartments and budget hotels.
He said most of the foreigners, mainly Somali nationals, buying properties in prime areas of Mombasa and Nairobi acquire them through proxies.
But a city lawyer involved in conveyancing, who spoke to the Sunday Nation on condition that he be not identified so as not to jeopardise some of his transactions, also attributed the rise in prices to remittances from Kenyans abroad and non-secured local bank loans.
He said the increase in prices seen in areas like Eastleigh, Parklands, Kilimani, Nairobi West and Lang'ata was at least in part due to change of use determined by the city council from residential to commercial.
He said First and Second Avenues in Eastleigh have been converted from residential to commercial use, pushing up property prices on the two streets.
He said the Somali and Asian communities in Kenya were well known for their entrepreneurship, especially in property conversion. But he did not say whether those buying were Kenyan nationals.
The lawyer said this was also true for Parklands, especially the road that runs from Forest Road cutting across to Highridge shopping centre.
He said property prices along this road have more than doubled in the last five years as residential areas are converted to commercial use.
He said the same was true for properties on Ngong Road, Argwings Kodhek and Lenana Road, all in the Kilimani area.
While the majority of properties in these areas were residential, they have now been converted into multi-family dwellings, and office and business premises.
Mr Njehia said that in areas like Kilimani, Kileleshwa and Lavington, the cost of building apartments has gone up. But he also suggested that the global credit crunch could soon hit the local property market.
The valuer said the local market has started to experience stagnation since the beginning of the year when overseas Kenyans stopped remitting money.
There is stagnation in the properties market, but the magnitude can't be measured at the moment, he said.
A banker who cannot be named as he is not authorised to speak to the media, said banks had financed the cost of an estimated 500,000 houses since President Kibaki took over power in 2003.
But he cautioned that with rising inflation, many Kenyans who secured mortgages might start experiencing difficulties servicing their loans.
He suggested that as many as half these houses might be repossessed because of inflation spurred by the global credit crisis.
International security agencies are also said to be concerned about the less-than-transparent acquisition of petrol stations and other businesses.
Sunday Nation
Post published in: Economy